Bridges With Centralized Finance Are Needed – Expert Panel

Source: AdobeStock / Andrii Yalanskyi

As decentralized finance (DeFi) and central banking share a number of objectives, building bridges between decentralized and centralized finance (CeFi) could open up new possibilities for the use of central bank digital currencies (CBDCs) , according to the participants of a debate held by the Innovation Hub of the Bank for International Settlements (BIS) and the Swiss National Bank (SNB).

Per this panel, DeFi and CBDC remain two distant spheres, but with the DeFi ecosystem continuing to mature, the space of common interest could expand. 

Moderator Thomas Moser, Alternate Member of the Governing Board of the SNB, said during the DeFi 22 event that DeFi’s potential stronger ties with CBDCs required policy-makers to answer questions such as: do we need a lender of last resort in DeFi?

Amit Chaudhary, Head of DeFi Research at Polygon (MATIC), argued that:

“All the regulation mechanics have objectives. We have central banks, and we have DeFi. Our objectives are the same: financial inclusion, reduced financial costs, privacy. Privacy is very important to users.”

Chaudhary added that “the last objective is financial stability, and you might be surprised to hear that … I’m seeing the owners of the protocol … doing stress tests now.”