The threat that decentralized finance poses to traditional finance is spurring regulators to agree on how to supervise cryptocurrencies.
Central bankers are set to agree on a framework to regulate crypto globally as soon as 2022, Benoît Cœuré told the «Financial Times» (behind paywall). He is a French policymaker who has led the Bank for International Settlement's innovation hub since last year.
The rapid spread of so-called DeFi, or decentralized finance, this year has given policymakers a «wake-up call» to act, Cœuré said. DeFi is poised to disrupt traditional venues and exchanges by taking transactions off exchange with smart contracts.
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DeFi services «will be competing with traditional finance, and money will flow in and out from one universe to another,» Cœuré said. «This creates a compelling reason to start a discussion on global principles for crypto regulation.»
While regulators could agree on a crypto framework next year, Cœuré said it may take several more to roll out in various countries. On crypto, Switzerland has pressed ahead with a raft of adoptions to existing law, including one to approve a blockchain-based exchange.
