- BIS warns crypto and DeFi have reached a critical mass, posing risks to global financial stability.
- DeFi sees regulatory pushback and internal reforms as BIS urges compliance with risk controls.
The Bank for International Settlements (BIS) has released a report that has many eyes in the financial industry looking at crypto and DeFi. The point? They say that this sector has reached a critical point. It is no longer just a young person’s toy on internet forums, but has entered a level that could shake the traditional financial system if we are not careful.
Interestingly, this report also raises one quite sharp concern: the wealth gap could widen because of crypto. How is that possible? According to the data, retail investors are actually more active in buying when the market is falling, while big players have already fled. Just imagine if the ones who lose are those with limited money. It’s not just about falling prices, but the long-term effects on wealth distribution could be messy.
When DeFi Meets the Real World
The BIS explains that there are four main pathways that could cause crypto and DeFi to affect the global financial system: direct exposure of financial institutions to crypto assets, shocks to market confidence, fluctuations in wealth due to price volatility, and the use of digital assets for transactions that bypass traditional systems.
This is not just theory. As products like spot Bitcoin ETFs and real-world asset tokenization become more commonplace, the lines between crypto and the legacy financial system are blurring.
Furthermore, the BIS also recommends that the DeFi sector begin to comply with applicable regulations. They encourage the implementation of KYC (Know Your Customer), data transparency, and stricter risk management.
So, you can no longer just create protocols without knowing who the users are or how the funds are managed. However, this is nothing new. The DeFi community has long debated how far they should follow regulations.
But on the other hand, there are signs to the contrary. In the first week of this month, the CNF has highlighted that DeFi revenues have fallen for four consecutive months. Not only that, the total value locked (TVL) in this sector has also fallen by more than 30% since December 2022.
This could be a sign that users are starting to slowly withdraw due to diminishing trust or returns that are no longer attractive.
From Washington to the Blockchain: Momentum Builds
However, this does not mean that DeFi is just waiting for its fate. There is also quite refreshing news. On April 10, 2025, US President Donald Trump signed a reversal of an IRS rule that initially expanded the definition of a broker to include DeFi platforms.
The rule caused quite a stir because it was considered unrealistic—DeFi platforms don’t have direct user data. The reversal was seen as a moral and political victory for the crypto community.
In addition, Threshold Network—a Bitcoin-based DeFi project—also recently took a major step. They announced a restructuring of their DAO to cut operating costs by $1.1 million per year. The effects were immediate.
Their treasury stopped selling T tokens and instead started buying them back. The result? The price of T tokens soared by more than 55% in a week. It was a sign that the new strategy could restore market confidence.
