Fed Chairman Jerome Powell said the DeFi ecosystem needs more proper regulation. Indeed, he pointed out that decentralized finance has “very significant structural problems”.
Fed Chairman Jerome Powell on DeFi regulation
During a meeting on Digital Finance, Jerome Powell raised a topic regarding the regularization of DeFi. This round table, organized by the Banque de France, was held on Tuesday.
According to Powell, the normalization of global monetary policy has only exposed DeFi’s structural problems. He also added that the decentralized finance ecosystem lacks transparency. Which is a big problem.
“The good news, I guess, is that…from a financial stability perspective, the interaction between the defi ecosystem and the traditional banking system and the traditional financial system is not that important at this point. So we were able to attend the winter challenge. It has had no significant effects on the banking system and broader financial stability,” Powell detailed.
This is good news, according to the Fed Chairman. For him, this demonstrates the weaknesses of the DeFi ecosystem. “Which gives us some time,” he says. Indeed, it is important to carry out the work around the regulations with care and reflection.
Other participants agree with Powell
This situation he has just described will not persist indefinitely, warned the Fed Chairman. It’s not a stable balance, he says. Therefore, one should be careful when establishing the most appropriate rules on cryptocurrency activities. He also clarified:
“In any case…There is a real need for more appropriate regulation, so that as DeFi grows and begins to reach more and more retail customers, appropriate regulation is in place.”
ECB President Christine Lagarde and BIS Managing Director Agustín Carstens agree with Powell. Participating in the discussion, they indeed believe that it is important to regulate the DeFi ecosystem appropriately.
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