Press Release
BWC Digital Finance Project Team Releases New Briefs on DeFi Technology and Regulation
Bretton Woods Committee
|
Thu, Oct 13, 2022
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(For immediate release. Washington, D.C. October 13, 2022, 11:00 AM ET) – The Bretton Woods Committee (BWC) is pleased to announce the release of our two newest reports: “DeFi Technology: Opportunities and Challenges” and “Investor Protection, Market Integrity and Financial Stability in Digital Finance”.
Published by BWC Digital Finance Project Team (DFPT), the two briefs are part of a series exploring the critical regulatory and policy issues of digital assets and the crypto market. The DFPT is part of BWC’s Future Finance Working Group (FFWG), a multisectoral group of leaders charged with evaluating emerging trends, opportunities, and ideas within the realm of global finance.
Advocates of DeFi solutions argue that these new technologies could be used to provide significant benefits in terms of access, cost, and the ease of using financial services. How this plays out, in terms of its impact on the structure of the industry and how such services are provided is likely to have significant consequences for the global economy. The objective of these briefs is to examine the potential benefits that these new technologies and a decentralized finance system might generate and to identify and propose ways in which an appropriate regulatory framework would enhance their potential while minimizing risks.
“From blockchains and their consensus protocols to smart contracts and their wide variety of uses, the spectrum of new and repurposed technologies is growing exponentially and has the potential to disrupt many traditional financial service activities” - affirms Greg Johnson, co-author with Adam Schneider and Marsha Vande Berg of “DeFi Technologies: Opportunities and Challenges”. In their analysis, they explore how these technologies could reduce costs, mitigate systemic risks, facilitate innovative business models, and address the limitation within.
In “Investor Protection, Market Integrity and Financial Stability in Digital Finance” co-authors Richard Berner, Douglas Elliott, and Mahesh Kotecha argue that three principles are fundamental to realize the benefits of digital finance while promoting safety and resilience: laws and regulations should support responsible innovation; “same activity/risk, same outcome;” and technology-independent objectives. Authorities should begin developing appropriate legal and regulatory frameworks at both the national and the global levels to mitigate the potential risks and vulnerabilities in these activities. The goal must be to ensure that the benefits of digital innovation will outweigh its risks.
“Legal and regulatory consistency is needed globally in order to build trust, promote a level playing field and limit the regulatory arbitrage to which crypto and DeFi are especially prone,” note the authors. “And while such activities aren’t currently consequential enough to threaten financial stability, they could be in the future.”
The two above mentioned reports will be presented at 11:00am EDT on October 13, in an online discussion with Richard Berner, William C. Dudley, and Greg Johnson moderated by Carolyn Wilkins at BWC’s International Council 2022.
About the Bretton Woods Committee
The Bretton Woods Committee is the preeminent non-profit organization dedicated to effective international economic and financial cooperation. www.brettonwoods.org
Media Contact Elena Tosana, Program Director, etosana@brettonwoods.org, +1-703-389-7428
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BWC Digital Finance Project Team Releases New Briefs on DeFi Technology and Regulation
Bretton Woods Committee | Thu, Oct 13, 2022
(For immediate release. Washington, D.C. October 13, 2022, 11:00 AM ET) – The Bretton Woods Committee (BWC) is pleased to announce the release of our two newest reports: “DeFi Technology: Opportunities and Challenges” and “Investor Protection, Market Integrity and Financial Stability in Digital Finance”.
Published by BWC Digital Finance Project Team (DFPT), the two briefs are part of a series exploring the critical regulatory and policy issues of digital assets and the crypto market. The DFPT is part of BWC’s Future Finance Working Group (FFWG), a multisectoral group of leaders charged with evaluating emerging trends, opportunities, and ideas within the realm of global finance.
Advocates of DeFi solutions argue that these new technologies could be used to provide significant benefits in terms of access, cost, and the ease of using financial services. How this plays out, in terms of its impact on the structure of the industry and how such services are provided is likely to have significant consequences for the global economy. The objective of these briefs is to examine the potential benefits that these new technologies and a decentralized finance system might generate and to identify and propose ways in which an appropriate regulatory framework would enhance their potential while minimizing risks.
“From blockchains and their consensus protocols to smart contracts and their wide variety of uses, the spectrum of new and repurposed technologies is growing exponentially and has the potential to disrupt many traditional financial service activities” - affirms Greg Johnson, co-author with Adam Schneider and Marsha Vande Berg of “DeFi Technologies: Opportunities and Challenges”. In their analysis, they explore how these technologies could reduce costs, mitigate systemic risks, facilitate innovative business models, and address the limitation within.
In “Investor Protection, Market Integrity and Financial Stability in Digital Finance” co-authors Richard Berner, Douglas Elliott, and Mahesh Kotecha argue that three principles are fundamental to realize the benefits of digital finance while promoting safety and resilience: laws and regulations should support responsible innovation; “same activity/risk, same outcome;” and technology-independent objectives. Authorities should begin developing appropriate legal and regulatory frameworks at both the national and the global levels to mitigate the potential risks and vulnerabilities in these activities. The goal must be to ensure that the benefits of digital innovation will outweigh its risks.
“Legal and regulatory consistency is needed globally in order to build trust, promote a level playing field and limit the regulatory arbitrage to which crypto and DeFi are especially prone,” note the authors. “And while such activities aren’t currently consequential enough to threaten financial stability, they could be in the future.”
The two above mentioned reports will be presented at 11:00am EDT on October 13, in an online discussion with Richard Berner, William C. Dudley, and Greg Johnson moderated by Carolyn Wilkins at BWC’s International Council 2022.
About the Bretton Woods Committee
The Bretton Woods Committee is the preeminent non-profit organization dedicated to effective international economic and financial cooperation. www.brettonwoods.org
Media Contact Elena Tosana, Program Director, etosana@brettonwoods.org, +1-703-389-7428