According to LedgerInsight, the Bank for International Settlements (BIS) released a paper this week exploring the financial stability risks of cryptocurrencies and decentralized finance (DeFi). Most central bank officials believe that cryptocurrency is too small in scale and self-contained, therefore it has not yet posed a financial stability risk. The report points out that the cryptocurrency market has reached a critical size, although it still believes that the connection between cryptocurrency and traditional finance (TradFi) is minimal. However, the issuance of Bitcoin ETFs, the expansion of stablecoins, and the tokenization of real-world assets (RWAs) are changing this situation.
In the report, it is recommended to further study the role of DAO in governance, how it affects financial stability, and how regulatory agencies can participate in it. When outlining the operation of DeFi, the difference between DeFi protocols and applications is pointed out, with the latter typically having a user interface and "centralized vectors". In other words, dApps are potential regulatory touchpoints. At the same time, it is urgent to study the impact of RWA tokenization on financial stability, including the systemic risks of closer ties between DeFi and TradFi. In addition, stablecoins play a central role in DeFi, and their potential instability is an area that requires further analysis.
