Bank of England peers into the opaque world of DeFi

The Bank of England has begun to explore how to manage risks generated by the rapid initial growth of decentralized finance, or ‘DeFi’ applications.

The challenge refers to distributed algorithmic financial services based on contractual knowledge and equipped with DLT infrastructure without consultants.

Defi’s most popular tool today is debt processing. Lending now costs almost half of Defi’s market.

However, challenge models and technologies can be used to simulate a variety of financial services, such as banking, transactions, insurance, and causes. The challenges are small now, but growing rapidly, from less than $ 10 billion in early 2020 to $ 100 billion last month.

Jon Cunliffe, President of the Bank of England, said the high prevalence and global prevalence of Defi, along with the difficulty of finding issuers, poses challenges for your regulators.

“At first glance, it’s clear that this phase is unambiguous, complex and involves risky activities – the activities are regulated and usually money -sharing,” he said. “Market integrity challenges arise in the absence of investor protection, anti-money laundering, and other market integrity standards.”

He also said that subject to the provisions, no one should be allowed to participate and respond.

“In large cases, the Defi platform can be fully developed without recognizing a legal entity, existence, or part of human interaction,” Cunliffe said. “Defi is still in its infancy, but its rapid growth means regulators need to think carefully at the national and international level about the risks of a wide range of species. Financial services offered by the Defi platform and how to ensure. ”

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