DeFi Can Eliminate Financial Risk, According To The Bank Of England

Decentralized finance (DeFi) protocols do not yet provide an effective way to manage risk, the Bank of England deputy governor warned on Monday. 

The claim by DeFi advocates that a code can manage risk, rather than intermediaries, is unproven, Jon Cunliffe told an audience at the Warwick Business School. ”From the standpoint of a financial stability authority and a financial regulator, I have yet to be convinced that the risks inherent in finance can be effectively managed in this way,” he said.

Cunliffe compared DeFi protocols to driverless cars, saying they were only as good as the rules, programs and sensors which organize their operations. 

”Moreover, it is not clear the extent to which these platforms are truly decentralized,” he added. ”Behind these protocols typically sit firms and stakeholders who derive revenue from their operations. Moreover, it is often unclear who, in practice, controls the governance of the protocols.”

The regulatory framework for a digital asset payment system, including the use of services like wallets, will be the subject of a consultation by the Bank of England next year, according to Cunliffe.

Once the so-called Financial Services and Markets Bill clears parliament and becomes law, the central bank and the Financial Conduct Authority will have more authority to regulate stablecoins and other crypto-related technology.

According to Cunliffe, the UK Treasury will also conduct a consultation on how to include activities and businesses involving crypto assets in investor protection, market integrity, and other regulatory frameworks that regulate the promotion and trading of financial products.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join us to keep track of news: https://linktr.ee/coincu

Website: coincu.com

Annie

CoinCu News