U.S. and U.K. regulators called for increased international collaboration to help them oversee decentralized finance (DeFi) and the growing crypto sector.
“I think a lot of the progress that we make along this road will depend on really high levels of international collaboration if we’re going to unlock the potential of digital assets and services,” U.S. Federal Reserve Chair Jerome Powell said at the Bank for International Settlements (BIS) Innovation Summit on Wednesday.
Andrew Bailey, governor of the Bank of England, agreed that regulators have to “quickly” get a handle on DeFi and the sector’s growth.
"We have to do it together, internationally. Because if we try to do it within our own locations, we're going to fail because it will escape us and… it'll always be somewhere else,” Bailey said at the summit.
The U.K. had $170 billion in value received from DeFi protocols between June 2020 and July 2021, the most in Europe at the time, according to a Chainalysis report.
Central bank digital currencies
The Fed is sharing its analysis on central bank digital currencies (CBDC) with six other central banks at the BIS, Powell said. Their discussions will cover the whole digital landscape including stablecoins, crypto assets and financial innovation.
“We are dedicated to working with our domestic and international colleagues on making sure that the payment and monetary systems evolve in a responsible way that brings about improvements while also maintaining safety, soundness and financial stability,” Powell said.
The Fed released its long-awaited white paper on central bank digital currencies in January, but did not commit to creating a digital dollar. The white paper stated any CBDC should ensure privacy, be an intermediary with the private sector, be transferable and adhere to rules on money laundering and financing terrorism.
Meanwhile, private parties in the U.K. launched the Digital Pound Foundation, an organization that aims to promote the development of a CBDC in the country in October.
Around the world
The Fed is actively engaged with other central banks and international partners in moving the Group of 20 (G20) nations’ cross-border roadmap forward. Powell added the roadmap carries the potential to address the frictions in international payments for G20.
The BIS Innovation Hub, along with central banks in Australia, South Africa, Singapore and Malaysia, concluded their ongoing experiment with a multi-CBDC platform, dubbed Project Dunbar, on Tuesday. The researchers found their prototype platform for settling state-backed virtual assets was "technically viable."
Meanwhile, European Central Bank President Christine Lagarde said it was urgent for the bank to complete its digital euro work. The ECB is on track to finish its digital euro project in two years.
The International Monetary Fund said in October that 110 countries are at “some stage” of investigating the potential of having a CBDC in their country.
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