Jerome Powell may not be completely down with DeFi but he isn't taking the hard line other regulators are pursuing in the latest crackdown on crypto.
The forum in Paris was held on Tuesday to discuss the tokenization of finance. The Federal Reserve chair, Powell, argued for a nuanced stance on DeFi.
As a rule of thumb, he favors establishing rules in decentralized finance. But he cautioned against having to pass tightened regulations without properly assessing the damage they could cause the fledgling industry. In addition, Powell said, there shouldn't be any rush to regulate because crypto doesn't pose a systemic risk to traditional finance.
Powell said in regard to a digitalized dollar, that the Fed is in no hurry to launch a CBDC. The Fed will collaborate with the U.S. Congress and the Biden Administration to evaluate policy and technological issues.
A CBDC program should have four capabilities: intermediated, privacy-protected, identity-verified, and interoperable.
's traditional banking system as well. Powell said he was determined to continue working with the federal government to improve our economy.
Christine Lagarde, the President of the European Central Bank, chairs Powell's tone, which sets monetary policy for the 27-nation European Union.
Lagarde explained how crypto came from a fringe idea embraced by Libertarians into a payment system embraced by stalwarts like Visa, Mastercard, and PayPal. However, Lagarde highlighted the $60B collapse of Terra and said the failure demonstrated the need for strict regulation. She said Terra was 'abused' by its position in the crypto industry.
In what Lagarde said, central bankers wereobligated to study blockchain technology.
The worry about DeFi is increasing, as regulators focus on the dangers of DeFi. Agustin Carstens, the general manager of the influential Bank of International Settlements in Switzerland, said DeFi applications are susceptible to the same perils found in traditional finance, including liquidity risk, counterparty risk, and leverage risk. He added that DeFi doesn't have the necessary infrastructure to address these challenges.
The forum comes at a rocky moment in crypto regulation. South Korea is reportedly trying to question Do Kwon, the founder and a native of the Asian nation, and freeze his assets. South Korean prosecutors are asking for his passport to be deleted. Interpol's Red Notice for the entrepreneur's detention by member nations suggest that he is on the run.
On Sept. 17, Do Kwon said he is cooperating with authorities. He said: On the run, or anything similar, he said.
Gary Gensler, the head of the SEC, has suggested proof of Stake cryptocurrencies such as Solana and now, Ethereum, may be deemed securities and subject to registration requirements.
The Commodity Futures Trading Commission blasted DeFi last week for failing to register its offerings as derivative securities. The U.S. lawmakers are also drafting legislation that may curb certain algorithmic stablecoins for a period of two years.