Decentralized protocols have yet to provide an effective way to manage risk. That was stated by the Bank of England’s deputy governor, John Cunliffe.
“From the standpoint of the financial-stability authority and regulator, I am not yet convinced that the risks inherent to finance can be effectively managed in this way,” the official said.
He compared DeFi protocols to autonomous vehicles. In his view, the latter are “as good as the rules, programmes and sensors that govern their operation.” In the same breath, Cunliffe questioned the degree of decentralisation of these projects.
“Behind these protocols are typically firms and stakeholders who earn income from their activities. Moreover, it is often unclear who actually controls the governance of the protocols.”
The official also pointed to the need to develop robust consumer-protection measures after collapse of FTX. In his view, one of the crisis catalysts could have been the exchange’s utility token (FTT), which “had no intrinsic value” and “should not have been accepted as collateral for loans and margin payments.”
proposed regulating cryptocurrencies in line with traditional finance.
Earlier, in the summer of 2022, Britain’s Minister for Digital, Culture, Media and Sport, Chris Philp announced plans to turn the country into a ‘crypto hub’.
Back in the UK Parliament, introduced a bill on financial services and markets. The document aims to create a regulatory framework for stablecoins and to combat economic crime.
In late October, the House of Commons backed the amendments to this bill. The proposed changes include digital assets within the scope of regulated financial services.
Follow ForkLog’s bitcoin news on our Telegram — cryptocurrency news, prices and analysis.