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Top central bankers in agreement: appropriate DeFi regulation is essential

During a panel discussion on digital finance hosted by the Banque de France, participants shared their views on DeFi and possible next steps. They agreed that broader regulation of DeFi is essentially necessary. As Powell stated, from the point of view of financial stability, the relationship between the DeFi ecosystem and the traditional banking and financial system is not essential at this time. However, Powell emphasized that there are "very significant structural issues around the lack of transparency" in the DeFi ecosystem. He also mentioned that if the US Central Bank Digital Currency (CBDC) were to actually be launched, it would not be anonymous and would involve verifying the identity of users.

Carstens presented the view that DeFi is primarily about self-referential transactions that are not tied to real transactions and applications rely on secured agreements. He also pointed out that the big problem is "exchange houses". According to him, they do too many things at the same time, lack proper separation, responsibility and adequate management. He further said that the DeFi space is not ready to handle risks such as liquidity, counterparty and leverage. As DeFi applications facilitate lending and trading to various intermediaries, Carstens emphasized that a huge challenge facing central bankers and regulators around the world is the fact that DeFi and cryptocurrencies are global and borderless.

The President of the Federal Reserve, Powell, acknowledged that DeFi is increasingly appealing to retail customers. He emphasized that as the DeFi field expands, regulation is indeed necessary to protect consumers . He stated that careful consideration needs to be given to how these crypto-activities work within the regulatory perimeter.

The President of the European Central Bank, Lagarde, commented that cryptocurrencies are a mysterious phenomenon. She specified that it has evolved from a cultural hype promoted by Satoshi Nakamoto and promoted by libertarians to a tool that is accepted by such companies as PayPal, Visa or Mastercard.


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