It is reported that current Federal Reserve Board Governor Christopher Waller talked about the impact of applications such as blockchain, stablecoins and even DeFi on U.S. finance at the 19th Annual Vienna Macroeconomics Symposium on Friday. Christopher Waller is one of the seven members of the Federal Reserve Board of Governors who was nominated by Donald Trump in 2020. He affirmed at the meeting that technological progress can promote the improvement of financial efficiency, but DeFi will not replace centralized finance. Part of the reason is that DeFi still requires legal currency as an intermediary.
DeFi can improve financial efficiency, but it cannot replace the centralized financial system
"Although some of the services emerging in DeFi cannot be provided by centralized finance, the technological innovations brought by DeFi are to a large extent complementary to centralized finance." Christopher Waller said, adding: "They have the potential to improve central finance. decentralize finance, thereby adding significant value provided by financial intermediaries and centralized financial markets.”
Although the Federal Reserve Board member affirms the development of DeFi, the definition of DeFi in his mind still continues centralized finance, rather than an independent system. We can confirm this idea from his speech, he said: "DeFi can complement the centralized financial sector, but it cannot replace it."
Fed governor cites free market doctrine and opposes issuance of CBDC
Christopher Waller also talked about stablecoins in his speech, saying that they are an important part of DeFi, but warned that there are risks involved.
"History is littered with cases of runs on synthetic U.S. dollars. Therefore, stablecoins face the same problems as any U.S. dollar alternative," Christopher Waller said. “If appropriate measures can be put in place to minimize operational risks and mitigate other risks, such as illicit financial use, stablecoins may benefit in terms of payments and serve as safe assets on a variety of new trading platforms.”
Christopher Walker previously said: "I still doubt that the Fed's CBDC can solve any major problems facing the U.S. payment system?" This Fed governor is relatively close to free marketism on this issue. He believes that allowing private institutions to issue stable The overall market development of currency pairs is better than that of government-issued CBDC.
"The government can only compete with the private sector if it is to solve market failures. This basic principle has laid a good foundation for the United States since its founding, and I think CBDC should not be an exception." Such a speech laid the foundation for provided the basis for his thinking on stablecoins. Continuing Christopher Walker’s preference for stablecoins over CBDC, he believes that stablecoins strengthen the application of the US dollar rather than weaken it.
Blockchain technology can be practically used in financial transactions that require 24/7 transactions
He also said blockchain technology could be a more efficient and faster way to keep records in a 24/7 trading world. Christopher Walker gave the example that some financial institutions are trying to use blockchain technology for repurchase transactions.
“But before these blockchain technologies can be used to trade traditional assets such as debt, equity, and real estate, these assets must be tokenized. Undertaking the asset tokenization process and using decentralized ledgers such as blockchain can speed up asset transfers. and take measures," Christopher Walker said.
The permissionless principle conflicts with crime prevention. How to choose between the future development of DeFi?
Finally talking about regulation, Christopher Waller believes that DeFi may also have its own risks, such as providing funds to bad actors. He also mentioned the need for regulation, which so far has not been mentioned by U.S. lawmakers in recent bills.
In legislation passed by the House last year, the U.S. Treasury Department, Securities and Exchange Commission, and Commodity Futures Trading Commission were directed to study DeFi. The bill, led by Republicans, gives the CFTC new jurisdiction over "digital commodities."
“In the field of centralized finance, there are regulations requiring banks to know who their customers are,” said Christopher Walker. And said he questioned whether these new technologies would require similar rules and regulations? (Although such a rule completely violates the concept of a permissionless open network as we know it)
This article "DeFi can improve financial efficiency" The current governor of the Federal Reserve talks about blockchain and US financial development first appeared in Chain News ABMedia.