Federal Reserve authors published two articles related to cryptocurrencies last week. The main topic of these articles US central bank warning It was about the dangers of DeFi.

The United States Federal Reserve Research Team published several articles on digital currencies last week. One of these articles was about Decentralized Finance (DeFi) and the other about the financial stability implications of digital assets.

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US central bank warning about the dangers of DeFi

In recent times, the Federal Reserve has put a lot of pressure on Oversight of the crypto industry, especially in the context of the links of this industry with the wider financial sectors. Federal Reserve Paper on Financial Stability Linked to Cryptocurrency Regulation The authors of this paper suggest that governments adopt stricter oversight of firms that manage client funds.

The warning of the Central Bank of America about the dangers of DeFi;  There is not enough supervision!

In part of the paper published by the Federal Reserve, it is pointed out that “oversight, comprehensive disclosure and capital requirements, if necessary, can improve the resilience of entities in the digital asset ecosystem”.

Centralized cryptographic units that operate on the counterparty to retail users in the digital asset ecosystem are generally not subject to capital, liquidity or comprehensive disclosure requirements. According to the authors of the Federal Reserve, the crypto ecosystem is susceptible to financial damage. Risks related to financial stability are not extensive, as the digital asset ecosystem does not provide significant financial services and its connection to the traditional financial system is limited.

Probability of deep problems in Digital assets ecosystem It led to the US Federal Reserve warning about the dangers of DeFi. The Central Bank of America believes that if the digital financial system connects more with the traditional system or expands its financial services, the risk of financial stability will decrease rapidly.

DeFi under the microscope of the Federal Reserve Bank of America

The Federal Reserve has also published an article entitled “The Decentralized Economy: Potential Risks”. In this article, an overview of The DeFi ecosystem Provided. The authors address the significant growth of the DeFi field while highlighting the field’s potential for long-term sustainable risks.

The Fed authors believe that providing financial services on public, permissionless blockchains has come a long way since the inception of Bitcoin. DeFi has yet to reach a point where it becomes systemically significant.

The warning of the Central Bank of America about the dangers of DeFi;  There is not enough supervision!

The rapid growth of blockchain And the field of DeFi doubles the need to establish serious and specific laws in the field of DeFi. Policy makers must pay serious attention to the full range of financial stability issues that increase the likelihood of systemic problems.

Policymakers decide which assets (such as dollars and unregistered securities) are allowed to operate on public permissionless blockchains. The evidence shows that DeFi is taking advantage of all the profit opportunities without worrying about regulatory rules. Public blockchains are evolving to provide a full range of services.

Regulatory authorities (including the Federal Reserve) lack the necessary tools to ensure that companies comply with specific laws. Carefully considered policies in advance may help mitigate the inevitable disruptions to financial stability caused by DeFi.

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Source: theblock

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