Financial policy makers from across the globe vowed Tuesday to take a closer look at the risks of decentralized finance (DeFi) as they rake over the coals of collapsed Bahamas-based crypto exchange FTX.
Members of the Financial Stability Board underlined the urgency of having a global framework for regulating and supervising crypto, as set out in an October consultation. They said the FSB would look closer at “DeFi-specific vulnerability indicators,” examining the interlinkages of a sector that is fast-growing and can replicate traditional activities like lending, but which is hard to regulate using traditional tools.
“Crypto trading platforms, combining multiple activities that are normally separated in traditional finance, can lead to concentrations of risk, conflicts of interest, and a misuse of client assets,” the FSB said, noting it had drawn “preliminary lessons from the recent failure of FTX.”
The Financial Stability Board includes central bankers, financial regulators and finance ministry officials from 24 jurisdictions including the U.S., U.K. and European Union, and its standards have been influential for regulating the traditional finance sector since 2008.
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.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.