The Fed saw DeFi as a threat to the financial system

Against the backdrop of the growing CeFi and DeFi market, experts from the US Federal Reserve System note that projects lack regulatory documentation to prevent risks.

The analytical division of the Federal Reserve (FEDS) has posted reports on the impact of cryptocurrencies and decentralized financial platforms (DeFi) on the stability of the US financial system. The Fed is pushing for greater control over the crypto industry, especially in the context of its connection with the traditional economy.

The report “The Implications of Digital Assets for Financial Stability” concluded that the development of the cryptocurrency ecosystem “contributes to the growth of financial vulnerability.” At the same time, analysts say that the risks to financial stability are small, since the cryptocurrency ecosystem does not provide significant financial services, and its relationship with the traditional financial system is limited. However, the risk may increase in the future.

“If the digital asset market becomes more interconnected with the traditional financial system and expands the provision of services, financial stability risks could rise rapidly,” Fed experts warn.

Contributors to Decentralized Finance, Transformative Potential and Associated Risks
note significant growth of the cryptocurrency industry, its potential and long-term risks for the stability of the traditional financial system.

“DeFi will seize any opportunities to profit, regardless of their impact on the financial system,” the authors of the report say.

The Fed’s research arm warns that the rapid development of DeFi will lead to a lack of the necessary tools to ensure regulators comply with laws and regulations. The Fed insists on the timely development of modern regulations for cryptocurrencies. According to analysts, the legislation should be on par with or slightly ahead of the development of the industry.

In August, the Fed announced that it plans to expedite the processing of applications from crypto banks for master accounts, as the current system is not suitable for institutions offering crypto services.

Source: Bits

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