US regulator wants to tighten control over DeFi sector

US Federal Reserve Chairman Jerome Powell has emphasized the need for proper regulation of DeFi due to the «conflict of interest» between the cryptocurrency sector and traditional finance. During a panel discussion organized by the Bank of France, Jerome Powell said that the decentralized finance (DeFi) industry has serious structural problems, and this could have a negative impact on monetary policy. According to him, the interaction between the DeFi ecosystem and the banking system is not yet significant, so DeFi does not have a significant impact on financial stability in general.

«We have witnessed the winter of DeFi, and this is good news. It shows that decentralized finance has its weaknesses, but this state of affairs will not last forever. One way or another, the industry is expanding and reaching more and more retail customers. Therefore, we need to use this time to thoughtfully and carefully develop the regulatory requirements for DeFi,» said Powell.

Christine Lagarde, President of the European Central Bank (ECB), and Agustin Carstens, President of the Bank for International Settlements (BIS), also took part in the discussion. They supported the Fed chairman, emphasizing the importance of developing regulations for the DeFi ecosystem.

Powell also emphasized the importance of the upcoming introduction of digital currency (CBDC). However, the politician noted that several more years of research are needed before the Fed decides whether to issue a digital dollar or not. It should be added that this statement contradicts the opinion of the US Financial Services Committee. Recently, the agency stated that China’s active work on the introduction of the digital yuan would negatively affect the American economy, so the only solution is to be proactive by developing its own digital dollar. Earlier, the Biden Administration noted that the United States wants to prepare for the issuance of the CBDC if the Treasury decides that the initiative is in the country’s interests. Biden’s representatives emphasized that the final decision will be made by the Fed.