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Well... this little post in the Quarterly Review from BIS (Bank of International Settlements) crossed my feed this morning. Titled ["Dollar debt in FX swaps and forwards: huge, missing, and growing"](https://www.bis.org/publ/qtrpdf/r_qt2212h.htm#:~:text=The%20%2480%20trillion%2Dplus%20in,of%20daily%20global%20FX%20turnover) it is quite a disturbing read on how there is a huge short-term accounting black hole in the Foreign Exchange backend. 

So, the BIS isn't your regular crypto-influencer-"news" outlet that is screaming about the fragility of the fiat illusion... BIS is known as the central bank for central banks. So, there are seriously hardcore into the back-end financial stuff! So, when they are publishing writing like this, it is quite interesting to read... and a touch worrisome. 

> "The $80 trillion-plus in outstanding obligations to pay US dollars in FX swaps/forwards and currency swaps, mostly very short-term, exceeds the stocks of dollar Treasury bills, repo and commercial paper combined. The churn of deals approached $5 trillion per day in April 2022, two thirds of daily global FX turnover.'

Now... you will notice that the key word is trillions... 80 trillions! This makes everything crypto seem like child's play... and the other key point is that all of these outstanding obligations are hidden away from public view in off-sheet accounting. So, if you thought that the way that FTX handled things was dodgy.... well, this is FX outstanding liabilities is highly trust based, and a potential disaster waiting to happening. 

Of course, when things are running smoothly... there is no problem. Foreign Exchange swaps are usually routed through US Dollars as a bridge currency that deepens liquidity. However, if there is a run on US Dollars, then there is going to be a huge problem.... as borrowers start needing to pay crazily high interest rates on these short term loans. 

Apparently, this already happened in 2008 (GFC) and 2020 (Covid)... and US dollars needed to be pumped into non-USD banks to keep everything functioning smoothly when the waters turned from choppy to tsunami-like. 

The sheer size of off-balance liabilities is just mind-boggling... imagine if it got out of hand... who would be left holding the bag of bad debt? And the 80 trillions is just an estimate only... remember, hidden from accounting?

So... this is one of the problems that crypto was meant to solve. The ability to track publicly and transparently who owns what, and who owes who what... this is the promise of tools like DeFi. The current system is opaque and too much based upon trust... and when things fail, extra-ordinary measures are taken to stop the whole thing falling over... and that sets up wobbly scaffolding for the next disaster. 

So... this is all a touch terrifying that institutions like the BIS recognise the problem and are worried about it. Will anything be done about it? Or will be just let things run as they always have... based in trust, both well-intentioned and misplaced. I don't think that we should base our digital infrastructure on good intentions... that hasn't really turned out well, and so this is the point of our space... replacing the sham front of the "digital" infrastructure that hides the web of good intentions and trust that are only just gaffer-taping over gaping structural holes. 

EEEP.... I hope those that are advocating for real reform win out... because the only people that are hurt when it all comes tumbling down are not the ones that caused it in the first place!


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