Finance Can Never Be Fully Decentralized, Says UK Central Banker

Carolyn Wilkins, advising the Bank of England on financial stability, cited issues of transparency, concentration and unpredictable events

AccessTimeIconOct 20, 2022 at 9:49 a.m. UTC
Updated Oct 20, 2022 at 2:39 p.m. UTC

Finance can never become truly decentralized, a member of the Bank of England’s financial stability committee has said, citing an unfair advantage for insiders and the need to respond to unforeseen events.

Carolyn Wilkins is the latest in a line of regulators to cast doubt on governance structures within decentralized finance (DeFi) – noting that poor decision-making led to the collapse of Bear Stearns and Lehman Brothers in the 2008 financial crisis.

“I think there are hard limits to how decentralized a system can become in practice,” said Wilkins, a research scholar at Princeton University who sits on the Bank of England’s Financial Policy Committee (FPC), in a speech published on Wednesday. The FPC was set up after the crisis to spot potential risks to the overall financial system.

“We live in an inherently uncertain world,” said Wilkins, previously at the Canadian central bank. “There can never be a set of smart contracts for every situation, and centralized decision making will always be needed when the unexpected happens.”

The invocation of emergency powers at protocols such as Solend has proved controversial, and Wilkins noted that DeFi structures can concentrate both knowledge and power in the hands of those with the most tokens or coding expertise.

But the possibility of using blockchain and other distributed technology for financial services such as lending has posed a quandary for regulators used to imposing rules on well-defined, centralized entities such as banks.

Late last year, researchers at the Bank for International Settlements called DeFi an “illusion.” Standard setters at the Financial Stability Board largely steered clear of the topic in an Oct. 11 report, despite calling for a “comprehensive” crypto rulebook.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.