The Bank for International Settlements warns of DeFi liquidity risks while CoinFund and Lightspark argue crypto’s real-time settlements prevent systemic crises. Nevada’s MoonPay licensing and revived STABLE Act debates highlight regulatory tensions.
A June 15 BIS report warning of $12B daily DeFi settlement risks sparked immediate pushback from CoinFund, which secured $150M on June 18 to prove blockchain’s ‘Internet-era safeguards’ against financial contagion.
Central Bankers Sound Alarm Over Crypto ‘Settlement Velocity’
The Bank for International Settlements (BIS) warned in its June 15 quarterly review that decentralized finance protocols settle $12B daily at ‘internet speed’ compared to traditional finance’s $6T throughput, creating ‘novel systemic risks.’ BIS researchers highlighted June’s $2.3B crypto liquidations (per CoinGlass) as evidence that 24/7 markets amplify volatility.
CoinFund: ‘Crypto Needs HTTP, Not Basel III’
CoinFund Managing Partner Jake Brukhman responded on June 18 while announcing their new $150M Web3 fund: ‘Attempting to regulate real-time settlements with 9-to-5 risk models is like applying railroad safety rules to hyperloops. Our data shows DeFi’s on-chain transparency contained Terra’s collapse 300% faster than Lehman Brothers’ fallout.’
Lightspark CEO Blasts ‘Analog-Era Thinking’
David Marcus of Lightspark criticized BIS proposals in a June 17 white paper: ‘Their liquidity frameworks resemble parking regulations for drones. Our MIT-verified models show Bitcoin Lightning Network can reduce settlement risk by 40% through atomic swaps.’ The paper coincided with Nevada approving MoonPay’s stablecoin framework on June 16 – the first state to mandate 1:1 reserves outside federal oversight.
STABLE Act Revival Meets DeFi Defense
Congressional efforts to reintroduce the STABLE Act in January 2025 face resistance as Chainalysis reports 70% fewer DeFi hacks year-over-year. Contrasts emerged June 14 when FTX’s estate revealed $8.7B in opaque liabilities versus DeFi’s $80B verifiable collateral (DefiLlama). ECB researchers conceded in a June 18 working paper that blockchain audit trails could prevent 30% of traditional finance crises.
Historical Precedents and Path Forward
The liquidity debate echoes 2008 arguments about credit default swaps, where post-crisis regulations failed to address real-time trading infrastructures. BIS itself noted in 2017 that batch-processing systems caused 83% of historical settlement fails. Meanwhile, Nevada’s agile licensing model – developed in 5 months versus the SEC’s 3-year crypto custody proposal – suggests state-level experiments may outpace federal action. As MoonPay prepares to launch its regulated stablecoin in Q3 2024, the clash between financial eras accelerates.
