BIS: DeFi is a warning bell, countries may reach a global regulatory framework consensus in 2022

Member of the Bank for International Settlements (BIS) Executive Committee Benoît Cœuré stated that cryptocurrencies are growing rapidly and are "becoming mainstream in different ways." He emphasized that decentralized finance (DeFi) serves as a warning signal for financial regulators, and countries may reach a consensus on the global framework for cryptocurrencies in 2022.

The Bank for International Settlements (BIS) Executive Committee member Benoît Cœuré stated that cryptocurrencies are growing rapidly and are "becoming mainstream in different ways." He emphasized that Decentralized Finance (DeFi) serves as a warning for financial regulatory authorities, and there may be consensus reached on the global framework for cryptocurrencies in 2022.

Benoît Cœuré also serves as the Head of the BIS Innovation Hub and is a member of the Executive Board of the European Central Bank (ECB). Prior to joining the ECB, he held various positions at the French Ministry of Finance and the Debt Management Office.

Benoît Cœuré told the Financial Times that global regulatory bodies have intensified discussions on global policies regarding cryptocurrencies and DeFi. He noted that the cryptocurrency market is indeed growing very rapidly and becoming mainstream in different ways, indicating that "it is certainly time for consistent regulation."

He described DeFi as a "warning bell" as it executes transactions worth billions of dollars using distributed ledger technology and smart contracts without the need for a central exchange. However, this also poses hidden potential systemic risks that regulators can no longer ignore.

He pointed out that major jurisdictions such as Europe, the UK, the US, and China will continue to regulate but in different ways, leading to a globally inconsistent system, which he sees as the biggest risk in 2022. Divergent cryptocurrency regulations among countries will create opportunities for "regulatory arbitrage," allowing companies and individuals to choose the most favorable locations for arbitrage between countries, a risk that should be avoided and there is still time to do so.

Therefore, he believes that there must be a global discussion on regulatory frameworks.

"These new services will compete with traditional finance, and funds will flow in and out of one universe to another. This creates a compelling reason to start discussing global principles for cryptocurrency regulation."

Cœuré suggested that the Financial Stability Board (FSB) is the most appropriate platform for global regulatory bodies to discuss and reach consensus. Action must be taken by at least 2022, and it may take at least another two to three years to achieve a stable structure on a global scale.

The Financial Stability Board was established in April 2009, an international organization responsible for regulating the global financial system and providing recommendations. Its members include central banks, finance ministries, financial regulatory authorities from over 20 countries, as well as major international financial institutions and professional committees.