Bank of England Deputy Governor Cunliffe cautions that decentralized financial procedures cannot be relied upon to minimize risk.
The deputy governor of the Bank of England cautioned on Monday that decentralised financial protocols do not yet offer an efficient means of managing risk.
“Jon Cunliffe addressed an audience at the Warwick Business School that the idea by DeFi proponents that a code can manage risk instead of intermediaries is unfounded. I haven’t been persuaded that the risks inherent in finance can be addressed in this manner successfully from the viewpoint of a financial stability authority and a financial regulator, he added.”
Cunliffe likened DeFi protocols to autonomous vehicles, stating that they are only as effective as the rules, algorithms, and sensors that govern their operations.
“Organizations and individuals with a financial interest in the protocols’ functioning are usually behind them. In addition, it is not often obvious who has ultimate authority over the protocols’ governance.”
Cunliffe said that the Bank of England would run a consultation next year about the regulatory framework around a digital asset payment system, including the usage of services like wallets.
Once the so-called Financial Services and Markets Bill passes parliament and becomes law, the central bank and the Financial Conduct Authority will have expanded oversight authority over stablecoins and other crypto-related technology.
Cunliffe said that the UK Treasury would conduct a consultation on how to extend investor protection, market integrity, and other regulatory frameworks governing the advertising and trading of financial products to actions and businesses involving crypto assets. Currently, he noted, only anti-money laundering laws apply to these operations.
Also Read: Netherlands Man Detained For Reportedly Laundering Bitcoin
Wallets