‘Robust’, ‘Stable’ Are Not the Words To Describe DeFi, Crypto -Breaking
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‘Robust’, ‘Stable’ Are Not the Words To Describe DeFi, Crypto- Governor of the Bank of Spain said today’s crypto and DeFi cannot be linked with “robustness” and “stability.”
- Basel Committee still has questions about DeFi or cryptocurrencies.
- Three principles were discussed in the 2019 report by the Committee.
Today’s crypto assets have a long way to go before getting associated with words such as “robustness” or “stability,” says Bank of Spain Governor Pablo Hernández de Cos at the International Swaps and Derivatives Association (ISDA) annual meeting, saying it is still unknown if today’s DeFi and crypto ecosystem “will deliver net benefits to society or not.”
Chairman de Cos explained, on Thursday, that the Basel Committee jury is still uncertain on how to “best” deal with DeFi and cryptocurrencies despite a deeper understanding of the technology today.
“The jury is still out when it comes to ascertaining how best to harness their oft-cited promises and benefits while mitigating their risks and safeguarding financial stability.”
De Cos said that DeFi and crypto should be fully utilized before institutions can explore the existing problems, which de Cos stated could then be addressed by financial architecture. The G20 roadmap was introduced to enhance cross-border payment before the advent of cryptos.
He also questioned how a decentralized financial system can be achieved in practice, since “some level of centralization is inevitable and structural aspects could lead to a concentration of power”.
Thirdly, the chairman suggested that the “noise” surrounding crypto should be filtered, pertaining to shilling and other bullish and bearish statements that could affect crypto prices.
“Most cryptoassets today cannot be associated with terms such as ‘robustness’ or ‘stability’,” stressed de Cos. “It’s not surprising to see that most central banks are exploring central bank digital currencies (CBDCs) as a potentially more promising route.”
To address the committee’s uncertainty of whether DeFi and crypto will deliver net benefits to society, de Cos reiterated its mandate to strengthen the regulation, supervision, and practices of banks worldwide.
The 2019 Basel Committee paper discussed three high-level principles. They were: simplicity and caution; same risk, the same activity and minimum standards.
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