Bank of England has recently issued a backward stance on the state of the DeFi sector. Speaking on the matter, the deputy governor of the Bank of England recently said that the DeFi sector currently does not offers an effective method to mitigate the financial risks.
Jon Cunliffe, who has been serving as the deputy position for a whole recently claimed that the idea that a code can replace the need for a bank is still not proven.
He was talking to the Warwick Business School when he claimed that financial regulators and financial authorities are crucial to managing a system.
He claimed that he has been looking for empirical proof that financial risks and regulatory-related work can be streamlined with blockchains without the need for human intervention.
Cunliffe has mentioned that blockchains are ideal for developing technologies such as self-driving cars. He claimed that crypto protocols like smart contracts are ideal for managing such intricate operations that require making lighting fast decisions to secure human life.
On the other hand, he claimed that there is currently no evidence as to how effective these blockchain vehicles are in real life.
He also added that it is not clear who is gaining money from running these blockchain operations.
At the same time, it is an important question that who controls the protocols that are governing these blockchains. It is important to note that the transparency of the traditional banking system is as good as non-existent.
Consultation Session on Crypto Regulations
As the year is coming to an end, the authorities at the Bank of England have shared plans to hold a consultation session on the matter of cryptocurrency regulations in the sector. Cunliffe briefed that the bank will mull the matters such as cryptocurrency services and custodial options.
The central bank will work in tandem with Financial Conduct Authority to oversee the matter of stablecoins and work on the subject of regulations on all cryptocurrency-related technology and innovation.
The Treasury agency of the UK has also planned to host a consultation session to introduce laws that will protect the interest of retail investors. At the same time, government agencies are going to cover the legislative framework for the promotion and advertisement of cryptocurrencies.
At present, only anti-money laundering laws apply to the cryptocurrency sector under the bank of England’s jurisdiction.