The three largest stable coins by market cap are Tether, Dai, andUSD coin.
Muhammed Akan is pictured.
The Bank for International Settlements said Monday that global "systemic regulation" is needed to oversee banking activity taking place outside of traditional financial institutions.
The market for peer-to-peer financial transactions has a valuation of over $100 billion. It has a market cap of more than $150 billion in the larger market. Stable coins are a popular way to facilitate DeFi projects.
The central bank forum said in a quarterly review that Defi supporters stress its potential efficiency gains, such as reducing high costs and slow speeds within traditional finance systems.
"For now, these gains are difficult to detect, with little in the way of financial intermediation services being provided to the real economy," wrote the central bank of central banks.
"Defi shows substantial financial vulnerabilities that exceed more traditional forms of finance, and give rise to first-order money laundered and investor protection concerns," it said. Stable coins are subject to classic runs and the backing of liquid claims with less liquid reserve assets can spark downward price spirals like those in the investment fund industry.
The institution said that there is an "illusion" that DeFi is not centralized. DeFi needs centralized governance to make strategic and operational decisions. The consensus mechanism is a feature that favors a concentration of power.
Defi has the potential to complement traditional financial activities. It has few real-economy uses and supports speculation and arbitrage across multiplecryptocurrencies, according to the Bureau of Industry and Security.
There have been a lot of price crashes in the criptocurrency. It's not clear whether the fragilities are limited to this environment or can spill over to the traditional one. The potential for spillovers should not be underestimated since the stablecoin arrangements themselves can create important links.
Business Insider has an original article.
