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Imagine a world where financial markets are automatically monitored in real-time, risks are identified instantly, and regulatory compliance is seamlessly integrated into every transaction.This isn't science fiction; it's the vision being proposed by a Bank for International Settlements (BIS) economist.In a recent working paper, Raphael Auer of the BIS championed the use of distributed ledger technology (DLT), often associated with blockchain, as a revolutionary tool for supervising financial market risks. BIS Economist Proposes DLT-Based Financial Market Monitoring Join us at www.knockcoin.io and start your cryptocurrency journey today! knockcoin cryptocurrency ICO cryptoexchange invest TOSC KnockCoin - BIS Economist Proposes DLT-Based FinancialAuer's proposal, dubbed ""embedded supervision,"" suggests a future where DLT's transparency and data credibility can dramatically improve the efficiency and quality of financial regulation.The concept revolves around tokenized markets and the automated monitoring they enable, potentially replacing traditional, often cumbersome, oversight methods. An economist of the Bank for International Settlements (BIS) has proposed new ways of supervising financial risks through distributed ledger technology (DLT). In a recently released working paper, economist Raphael Auer made the case for so-called embedded supervision, which would automatically monitor tokenized markets.But what exactly does this entail, and how could it reshape the landscape of financial supervision?This article delves into Auer's proposal, exploring its potential benefits, challenges, and the broader implications for the future of finance.

Understanding DLT and its Potential in Financial Supervision

Distributed ledger technology (DLT), at its core, is a database that is replicated and shared across multiple participants.This decentralization is key to its potential in financial markets.Unlike traditional systems that rely on a central authority to maintain records, DLT allows for transparent and verifiable transactions without the need for intermediaries in some cases.This inherent transparency and immutability are what make it attractive for enhanced financial supervision.

Auer's proposal leverages these characteristics of DLT to create what he calls ""embedded supervision."" This involves using smart contracts, self-executing agreements written into the blockchain, to automatically monitor tokenized assets and transactions. A novel type of financial infrastructure could enhance the global financial system, combining tokenised money and assets on a programmable platform. III. Blueprint for the future monetary system: improving the old, enabling the newBy embedding regulatory rules directly into these smart contracts, authorities can gain real-time insights into market activity and potential risks.

• Transparency: DLT provides a clear and auditable trail of all transactions.
• Real-time Monitoring: Smart contracts enable continuous monitoring of market activity.
• Automated Compliance: Regulatory rules are embedded in the system, reducing the risk of human error and non-compliance.
• Reduced Costs: Automating supervision can potentially lower costs associated with traditional oversight methods.

Embedded Supervision: A Closer Look

So, how does embedded supervision actually work? According to a report by Cointelegraph on September 17, an economist at the Bank for International Settlements (BIS) proposed a new approach to regulating financial risk through distributed ledger technology (DLT). Image source: BIS official website In a recent work paper, economist Raphael Auer proposed the so-called embedded supervision, which will automatically monitor the token-based [ ]Imagine a tokenized bond being traded on a DLT-based platform. An economist from the Bank for International Settlements has proposed new ways of supervising financial risks with distributed ledger technology. An economist of the Bank for International Settlements (BIS) has proposed new ways of supervising financial risks through distributed ledger technology (DLT). In a recently released working paper, economist Raphael Auer made the case for MoreTraditional supervision would require regulators to request transaction data, analyze it, and then potentially identify any irregularities.This process can be time-consuming and resource-intensive.

With embedded supervision, the regulatory rules are pre-programmed into the smart contract governing the bond.For example, if a transaction exceeds a certain threshold, the smart contract could automatically flag it for review by the regulator. BIS Economist Proposes DLT-Based Financial Market MonitoringThis allows for proactive monitoring and early detection of potential issues, such as market manipulation or money laundering.

Here's a simplified example:

1. A tokenized asset is created on a DLT platform.
2. Regulatory rules, such as transaction limits and reporting requirements, are encoded into a smart contract.
3. Every transaction involving the asset is automatically monitored by the smart contract.
4. If a transaction violates a rule, an alert is triggered for the regulator.
5. The regulator can then investigate the flagged transaction and take appropriate action.

Benefits of DLT-Based Financial Market Monitoring

The potential benefits of DLT-based financial market monitoring are substantial. 國際清算銀行（BIS）的一位經濟學家提出了通過分散式賬本技術（DLT）監督金融風險的新方法。在最近發布的一份工作文件中，經濟學家拉斐爾 奧爾（Raphael Auer）By leveraging the technology's inherent strengths, regulators can achieve greater efficiency, transparency, and effectiveness in their supervisory efforts.Let's examine some of the key advantages:

Enhanced Transparency and Data Credibility

One of the most significant benefits of DLT is its ability to provide enhanced transparency and data credibility.Because transactions are recorded on a distributed and immutable ledger, it becomes much more difficult to manipulate or conceal information.This increased transparency can help to deter illicit activities and improve investor confidence.

Traditional systems often rely on intermediaries to verify and validate data, which can introduce potential points of failure and opportunities for fraud. BIS Working Papers No 1015 . DLT-Based Enhancement of Cross-Border Payment Efficiency a Legal and Regulatory Perspective by Dirk A. Zetzsche, Linn Anker-S rensen, Maria Lucia Passador and Andreas Wehrli : Monetary and Economic Department . May 2025 JEL classification: G20, G21, G28, E42, E58, K23, K24, O16DLT eliminates the need for these intermediaries by providing a single, shared source of truth that is accessible to all authorized participants.

Improved Efficiency and Reduced Costs

DLT-based monitoring can also significantly improve the efficiency of regulatory processes and reduce associated costs.By automating many of the tasks that are currently performed manually, regulators can free up resources to focus on more complex and strategic issues.

For example, DLT can automate the collection and reporting of transaction data, eliminating the need for firms to manually compile and submit reports.This can save both time and money for both regulators and regulated entities.

Real-Time Risk Monitoring and Early Detection

The ability to monitor market activity in real-time is another key advantage of DLT-based supervision.Smart contracts can be programmed to automatically detect and flag suspicious transactions or patterns, allowing regulators to respond quickly to potential risks.

This real-time monitoring capability can be particularly valuable in identifying and preventing market manipulation, money laundering, and other illicit activities. Si los mercados basados en DLT se desarrollaran, esto cambiar a la forma en que se negocian los activos y c mo se empaquetan en productos financieros complejos. Dado que la informaci n contenida en la cadena de bloques es verificada por consenso econ mico descentralizado, podr a reemplazar los procesos actuales de entrega y verificaci nBy detecting these activities early on, regulators can minimize their potential impact on the financial system.

Reduced Reliance on Intermediaries

As Auer notes, DLT can reduce the traditional reliance on intermediaries in financial markets.This can lead to greater efficiency, lower costs, and reduced counterparty risk. based verification of legal data with blockchain-ena bled credibility based on economic consensus. The key results set out the conditions under which the market s economic consensus would be strong enough to guarantee that transactions are economically final, so that supervisors can trust the distributed ledger s data.By disintermediating certain functions, DLT can also make markets more accessible to a wider range of participants.

However, it's important to note that intermediaries will likely continue to play a role in DLT-based markets, albeit in different capacities. 国际清算银行（BIS）的一位经济学家提出了通过分布式账本技术（DLT）监督金融风险的新方法。 在最近发布的一份工作文件中，经济学家拉斐尔 奥尔（Raphael Auer）提出了所谓的嵌入式监管的案例，该监督将自动监控标记化的市场。For example, intermediaries may be needed to provide custody services, facilitate trading, and ensure compliance with regulatory requirements.

Challenges and Considerations for DLT Implementation

While the potential benefits of DLT-based financial market monitoring are clear, there are also several challenges and considerations that need to be addressed before it can be widely adopted.These include:

Scalability and Performance

One of the biggest challenges facing DLT is its scalability.Current DLT networks can often handle only a limited number of transactions per second, which may not be sufficient for high-volume financial markets.As such, the scalability of DLT networks is crucial.Research is underway to find the most scalable and efficient solutions.

Furthermore, the performance of DLT networks can be affected by factors such as network congestion and the complexity of smart contracts. BIS Economist Proposes Embedded Supervision to Enhance Transparency of Tokenized Markets. Lucas Cacioli . Economist Raphael Auer of the Bank for International Settlements (BIS) has championed distributed ledger technology (DLT) as a way of supervising financial market risks.Addressing these issues will be essential to ensure that DLT can support the demands of financial market monitoring.

Interoperability and Standardization

Another important consideration is interoperability.Different DLT platforms may use different protocols and standards, making it difficult to exchange information between them. In the case of regtech machine learning is used to help to monitor the financial sector. Blockchain or DLT based markets is about replacing the trust mechanism. Instead of purely relying on the legal system and oversight from authorities, a future blockchain-based infrastructure could rely on economic incentives to ensure reliable data.This lack of interoperability could hinder the adoption of DLT-based monitoring across the financial system.

To address this issue, efforts are underway to develop common standards and protocols for DLT.These standards would allow different DLT platforms to communicate with each other seamlessly, facilitating the exchange of information and improving the overall efficiency of the system.

Regulatory Clarity and Legal Framework

The regulatory landscape for DLT and cryptocurrencies is still evolving. The Committee on Payments and Market Infrastructures has published a report on Distributed ledger technology in payment clearing and settlement.The report provides an analytical framework for central banks and other authorities to review and analyse the use of distributed ledgers in payment, clearing and settlement activities.There is a need for greater clarity and consistency in the regulatory treatment of these technologies.Without clear regulatory guidelines, it may be difficult for firms to adopt DLT-based monitoring solutions.

Regulators around the world are actively exploring the implications of DLT and developing appropriate regulatory frameworks.These frameworks need to address issues such as data privacy, cybersecurity, and consumer protection.

Data Privacy and Security

Data privacy and security are also critical considerations.DLT networks must be designed to protect sensitive financial information from unauthorized access and misuse. Economista do Bank for International Settlements (BIS) prop s novas maneiras de supervisionar riscos financeiros por meio da tecnologia de ledger distribu da (DLT). Em um relat rio divulgado recentemente, o economista Raphael Auer defendeu a chamada supervis o integrada, que monitoraria automaticamente os mercados tokenizados.This requires robust security measures, such as encryption and access controls.

Furthermore, DLT networks must comply with data privacy regulations, such as the General Data Protection Regulation (GDPR) in Europe. Seorang ahli ekonomi untuk Bank for International Settlements (BIS) telah mencadangkan cara-cara baru untuk memantau risiko kewangan melalui teknologi lejar teragih (DLT).Dalam kertas kerja yang dikeluarkan baru-baru ini, ahli ekonomi Raphael Auer meThis may require the implementation of techniques such as pseudonymization and anonymization to protect the privacy of individuals.

Real-World Applications and Examples

While DLT-based financial market monitoring is still in its early stages, there are already several examples of its potential applications. Skip to main content Bitcoin Insider. MenuThese examples illustrate how DLT can be used to improve transparency, efficiency, and risk management in various areas of the financial system.

Cross-Border Payments

Cross-border payments are often slow, expensive, and opaque.DLT can be used to streamline cross-border payment processes, making them faster, cheaper, and more transparent. An economist of the Bank for International Settlements (BIS) has proposed new ways of supervising financial risks through distributed ledger technology (DLT). In a recently released working paperFor example, several companies are developing DLT-based platforms that allow individuals and businesses to send and receive payments across borders in near real-time and at a fraction of the cost of traditional methods.

Supply Chain Finance

DLT can also be used to improve transparency and efficiency in supply chain finance.By tracking goods and payments on a DLT ledger, companies can reduce the risk of fraud and improve access to financing. On the contrary, it is the time for unity across all domains, but very particularly in the economic and financial realm. In the face of external uncertainty, Europe must negotiate and act from a position of power and embrace its relative strengths, with robust institutions and a financial market equipped to foster growth and stability.This can be particularly beneficial for small and medium-sized enterprises (SMEs) that often struggle to obtain financing through traditional channels.

Securities Settlement

The settlement of securities transactions can be a complex and time-consuming process. 国際決済銀行（BIS）は、分散台帳技術（DLT）を通じて金融リスクを監督する新しい方法を提唱している。BISがこのほど発表したワーキングペーパーの中で、DLTを使った新しい監督手法が確立されれば、規制監督の効率性が飛躍的に向上すると指摘する。DLT can be used to streamline this process, making it faster, cheaper, and more efficient. entities. In many markets, financial market infrastructures (FMIs) are entrusted by their participants with updating and preserving the integrity of a central ledger and, in some cases, managing certain risks on behalf of participants. DLT could reduce the traditional reliance on a central ledger managed by a trustedBy recording securities ownership on a DLT ledger, companies can reduce the need for intermediaries and accelerate the settlement process.

The Future of Financial Supervision with DLT

The proposal by the BIS economist signals a potential paradigm shift in financial supervision. Economist Raphael Auer of the Bank for International Settlements (BIS) has championed distributed ledger technology (DLT) as a way of supervising financial market risks. Essentially, Auer purports that, The spread of distributed ledger technology in finance could help to improve the efficiency and quality of supervision.As DLT technology matures and regulatory frameworks become clearer, we can expect to see increased adoption of DLT-based monitoring solutions across the financial system.

This could lead to a future where financial markets are more transparent, efficient, and resilient. 分散型台帳技術が「金融市場の監督機能向上に役立つ」＝国際決済銀行エコノミストが分析Regulators will have access to real-time data and sophisticated tools for detecting and preventing illicit activities. An economist of the Bank for International Settlements (BIS) has proposed new ways of supervising financial risks through distributed ledger technology (DLT). Per the report, DLT and smart contracts can facilitate the development of financial markets through new forms of transparency and data credibility, and eventually exclude middleman-basedFirms will be able to comply with regulatory requirements more easily and at a lower cost. 据Cointelegraph 2025年9月17日报道，国际清算银行（BIS）的一位经济学家提出了通过分布式账本技术（DLT）监管金融风险的新方法。 图片来源：BIS官网 在最近发表的一份工作论文中，经济学家拉斐尔 奥尔（Raphael Auer）提出了所谓的 嵌入式监管 (embedded supervisionInvestors will benefit from increased transparency and reduced risk.

The key to realizing this vision is collaboration between regulators, industry participants, and technology providers. See full list on bis.orgBy working together, these stakeholders can develop DLT-based monitoring solutions that meet the needs of the financial system and protect the interests of investors and consumers.

Conclusion

The BIS economist's proposal for DLT-based financial market monitoring represents a significant step towards a more efficient, transparent, and secure financial future.By leveraging the power of distributed ledgers and smart contracts, regulators can enhance their supervisory capabilities, reduce costs, and mitigate risks more effectively.While challenges remain in terms of scalability, interoperability, and regulatory clarity, the potential benefits are undeniable.As the financial landscape continues to evolve, embracing innovative technologies like DLT will be crucial for maintaining stability, fostering innovation, and protecting the integrity of the global financial system.The concept of embedded supervision, utilizing DLT to automate and enhance regulatory oversight, has the potential to revolutionize how financial markets are supervised and regulated worldwide.This will require careful consideration, collaboration, and a commitment to addressing the existing challenges.