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Jerome Powell – the chairman of the U.S Federal Reserve – talked about the proliferation of Decentralized Finance and its effect on the local financial system, along with that he has requested suitable regulation.
Powell Says Crucial Structural Issues Are Present in DeFi Ecosystem’s Transparency
Jerome Powell stated that there existed some technical defects in the DeFi ecosystem, including its transparency. Agustín Carstens, the manager of BIS communicated his views about the difference between Decentralized and traditional financial systems. He added that the gigantic challenge for regulators as well as central banks is the worldwide application of cryptocurrency and DeFi.
Powell says the collaboration between banking and DeFi didn’t prove to be productive, due to economic stability concerns, by controlling the effects of DeFi’s winter. Moreover, he elaborated on the deficiencies as well as pointed out the regulatory system as an area of improvement.
Powell additionally said that DeFi is growing over time, it has begun to catch more consumers from everywhere, though a serious step is required to be taken to make the regulatory system appropriate. All these statements given by Powell depicted that he is optimistic about DeFi’s progressive future despite the current dejection.
DefiLlama’s report states that the total-value-locked (TVL) of DeFi which was at its highest level up to $62B, has recently fallen by 71% till the end of December. A similar downfall has been witnessed in the crypto market. The prominent digital assets organizations have greatly welcomed the endeavors taken by the Biden administration, in designing a comprehensive regulatory plan for the crypto industry.
Fed Chair Also Discusses Potential CBDC Plans
As the bureaucratic system of the United States is turning slack, this plan has to encounter several considerations before its final draft comes to light. The chairman of the U.S Federal Reserve has also shared his views about central bank digital currency (CBDC). He expressed that it should be launched, but must not be kept anonymous.
There ought to be a specific identification of that CBDC as well as a user verification system should also be introduced for its customers. In the meantime, the European Central is also taking similar endeavors. It is to determine if it will create a central bank digital currency (CBDC) in 1 year.
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