The US Federal Reserve just published a pair of papers last week exploring two topics related to crypto: “The Financial Stability Implications of Digital Assets” and “Decentralized Finance (DeFi): Transformative Potential & Associated Risks”
Authors of the paper on financial stability suggested stricter oversight for firms handling client funds, in line with the usual statements from The Fed. The paper said: “Oversight, comprehensive disclosures, and capital and liquidity requirements, where appropriate, could improve the resilience of entities within the digital asset ecosystem.”
The stability paper concluded that the crypto ecosystem is “prone to the buildup of financial vulnerabilities.”
The paper “Decentralized Finance (DeFi): Transformative Potential & Associated Risks” highlights crypto sector’s significant growth while stressing its potential for long-term stability risks. “…the rapid growth in the role of such blockchains suggests that policymakers should start giving serious consideration to a full range of financial stability issues that could arise should such activities become systemically important.” the paper said.