Jerome Powell, the US Federal Reserve chairman, believes there is a definite need for robust regulation before the DeFi market could expand to retail. He said the monetary policy normalization worldwide has revealed significant structural issues in the decentralized finance ecosystem and exposed conflict of interest.
Speaking at a conference hosted by the Banque of France, Powell said these are very significant transparency and lack of transparency issues within the DeFi ecosystem. He highlighted that the interaction between the DeFi ecosystem and traditional banking system, and traditional financial system is not that large and as such, they are able to see the DeFi winter that did not have consequential impacts on the banking system and broader financial stability.
The chairman thinks this demonstrates the weaknesses and the work that needs to be done around regulation carefully and thoughtfully. Powell said it’s not a stable equilibrium. Thus, investors need to be very careful about how crypto activities are taken within the regulatory parameter. The Federal Reserve called for appropriate regulation so that as DeFi expands and starts to touch more retail customers, more appropriate regulation is in place.
Sidney Powell, the CEO, and co-founder of Maple Finance highlighted that separating the risk from lending saved DeFi from the market crash. He said crypto lending operated as intended through the crypto winter because of transparency. Powell believes transparency has been the saving grace of decentralized finance amid the prolonged crypto market slump.
DeFi’s total value locked, as per analytical data, recorded a minor increase from the past week.
