According to Jerome Powell, DeFi requires proper regulation.
The Chairman of the United States Federal Reserve, Jerome Powell, recently shared his thoughts on the expansion of decentralized finance at a recent event. He also discussed the impact of DeFi on the conventional finance ecosystem. Powell said that for DeFi to grow and do well in the future, it needs to be regulated in the right way.
Powell spoke at an event titled “Opportunities and Challenges of Financial Tokenization. โOn Tuesday, September 27, the Banque de France hosted the event. Powell mentioned several structural issues in the DeFi world on this occasion. He also emphasized the sector’s lack of transparency and security.
Powell Highlights DeFi’s Weaknesses
Recently, there have been several DeFi exploits and hacks, leading to increased criticism of the growing concept. Millions of dollars have been spent on DeFi platforms that have proven vulnerable to hacking attempts. As a result, Powell requested greater transparency in the ecosystem. He made his remarks following the speech of Augustin Carstens, General Manager of the Bank for International Settlements (BIS).
Furthermore, Carstens outlined the distinctions between DeFi and traditional finance. He also stated that DeFi and crypto are borderless, making regulation difficult. Furthermore, Powell stated that the relationship between DeFi and the traditional banking setup has not been effective. However, it has highlighted the need for additional work in this industry’s regulations.
Powell also addressed the expansion and growth of the DeFi space. He stated that DeFi is attempting to connect with more retail customers. However, regulations must be in place before this can occur. Customers in the retail market will benefit from these rules because their money and assets will be safe.
The Federal Reserve Chairman’s remarks indicate that he sees potential for growth in the DeFi space. Despite the fact that the digital asset market is experiencing difficult times, Powell believes DeFi will gain popularity in the future. The total value locked (TVL) of DeFi has dropped by more than 70% as the market has deteriorated. Its precipitous decline is consistent with that of other financial markets.
However, the future appears to be bright. On the other hand, the FED chairman mentioned a US CBDC. He stated that it should include features for identity verification and should not be anonymous. This demonstrates that Powell addressed several key points regarding the country’s cryptocurrency plans.