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<ul class="summary-list"><li>DeFi poses risks to global financial stability and 'systemic regulation' is needed, the Bank for International Settlements said Monday. </li><li>Decentralized finance "appears to be operating largely within its own ecosystem," the institution said in a quarterly report. </li></ul>The Bank for International Settlements said Monday global "systemic regulation" is needed to oversee banking activity taking place outside of traditional financial institutions as DeFi, or decentralized finance, poses stability risks. <a href="https://www.businessinsider.com/what-is-defi">The DeFi market</a> for peer-to-peer blockchain-based financial transactions surged beyond $100 billion in valuation this year. It most recently carried a $143 billion market capitalization in the wider $2.4 trillion cryptocurrency market. Stablecoins are a popular vehicle in facilitating DeFi projects such as crypto lending and borrowing platforms."DeFi supporters stress its potential efficiency gains," such as reducing high costs and slow speeds within traditional finance systems, <a href="https://www.bis.org/publ/qtrpdf/r_qt2112.pdf">said the central bank forum in a quarterly review published Monday</a> about developments in banking and financial <keyword id="11893875" type="UNKNOWN" weightage="100" keywordseo="markets" source="Orion">markets</keyword>. "For now, these gains are difficult to detect: DeFi appears to be operating largely within its own ecosystem, with little in the way of financial intermediation services being provided to the real economy," wrote the institution known as the central bank of central banks. "At the same time, besides giving rise to first-order money laundering and investor protection concerns, DeFi displays substantial financial vulnerabilities," that exceed more traditional forms of finance, it said. Stablecoins – "the grease between DeFi wheels" – are subject to classic runs and the backing of liquid claims with less liquid reserve assets can spark downward price spirals akin to those stemming from redemptions in the investment fund industry, said BIS. The institution said there's the "illusion" that DeFi is decentralized. But DeFi needs centralized governance to take strategic and operational decisions, it said. "In addition, some features in DeFi, notably the consensus mechanism, favour a concentration of power." DeFi carries the potential to complement traditional financial activities. But for now, BIS argued it "has few real-economy uses and, for the most part, supports speculation and arbitrage across multiple cryptoassets." Risks in the crypto ecosystem have so far been in the form of frequent and sizeable price crashes. "Whether such fragilities are limited to this ecosystem or can spill over to the traditional one is still unclear. But the potential for spillovers should not be underestimated, especially since the stablecoin arrangements themselves can create important links," said BIS.

The decentralization promised by DeFi is an 'illusion' and a threat to global financial stability, BIS warns

<ul><li><keyword id="6355311" type="UNKNOWN" weightage="20" keywordseo="japan">Japan</keyword> has set up a brand new section within the <keyword id="11656167" type="UNKNOWN" weightage="20" keywordseo="finance-services-agency">Finance Services Agency</keyword> (FSA) to oversee ‘decentralised finance’.</li><li>In order to keep a closer eye on digital currencies, the Ministry of Financial is reportedly looking to increase its headcount.</li><li>Japan has been reasonably open to crypto exchanges, but a series of scams, heists, and irregularities have nudged the government towards global policies under the helm of the G7 and the G20.</li></ul>Japan’s financial regulator, the Financial Services Agency (FSA), has set up a new sector specifically to oversee digital currency regulation. And, the nodal Ministry of Finance is mulling over adding more staff to its ranks, according to a report by <a href="https://www.reuters.com/technology/exclusive-japan-beefs-up-diplomatic-efforts-regulating-digital-currency-sources-2021-07-16/">Reuters</a>. The island nation was the first country in the world to put a law in place that defined ‘crypto asset’ as a legal term. It was also the first to require companies to register as ‘crypto asset exchange service providers’ in order to operate a crypto exchange within the country. But, it has since stagnated. The country has been reasonably open to crypto exchanges, but a series of scams, heists, and irregularities have nudged the government towards global policies. Last month, the G7 — of which Japan is a participant — issued a notice covering central bank digital currencies (CBDCs) and global stablecoins last month. In October last year, the G20 — of which Japan is a member as well— filed a working paper outlining how stablecoins should be regulated. <cmsannotation type="cmsannotation" annotationid="Why is Japan ramping up its crypto regulation efforts?" comment="subhead" text="Why is Japan ramping up its crypto regulation efforts?">Why is Japan ramping up its crypto regulation efforts?</cmsannotation> Official sources told Reuters that the government’s primary objective is to mitigate the risk that crypto assets like stablecoins pose to the larger financial system. The new unit within the FSA launched on July 8. It aims to oversee ‘decentralised finance’. It's called DeFi (decentralised finance) because users don't have to place their trust in financial institutions, which are often accused of being too opaque and complex for customers to scrutinise. The FSA created a new position to head the section as well but there is no final word on the scope of the new section’s operations. Meanwhile, the increase in headcount within the Finance Ministry is aimed at ramping up digital currency oversight. <h2 style="line-height:1.38;margin-top:0pt;margin-bottom:0pt;"><cmsannotation type="cmsannotation" annotationid="The G7 prepares to buckle up." comment="subhead" text="The G7 prepares to buckle up.">The G7 prepares to buckle up.</cmsannotation></h2> In June, the G7 economies collectively called for more effective regulations of <a href="https://wazirx.com/signup?invite=2kpah6gr&amp;utm_source=business-insider&amp;utm_medium=referral&amp;utm_campaign=microsite">cryptocurrencies</a>, especially stablecoins. The comments were included in a June 5 <a href="https://www.gov.uk/government/publications/g7-finance-ministers-meeting-june-2021-communique/g7-finance-ministers-and-central-bank-governors-communique">communique</a> published after a G7 meeting of finance ministers and central bank officials in London. Central banks have intensified their criticism of cryptocurrencies as a battle over the monetary system escalates. In its <a href="https://www.bis.org/publ/arpdf/ar2021e3.htm">report</a>, the Bank for International Settlements (BIS) said, "innovations such as cryptocurrencies, stablecoins and the walled garden ecosystems of big techs all tend to work against the public good element that underpins the payment system." Stablecoins and digital assets more broadly have been in the G7's sights for several years. It feels that on a global scale, stablecoins could pose monetary policy and financial stability risks. Pegging a cryptocurrency directly to the US dollar or any other fiat currency means that it will inevitably have ties to the current banking system. One famous example is Tether, which has raised concerns in the US government and ranks third in market capitalization behind well-known cryptocurrencies <a href="https://wazirx.com/signup?invite=2kpah6gr&amp;utm_source=business-insider&amp;utm_medium=referral&amp;utm_campaign=microsite">Bitcoin</a> and Ethereum. "It is clear that cryptocurrencies are speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks, and other financial crimes," the BIS said. Facebook's <a href="https://www.businessinsider.in/finance/news/facebook-is-scaling-back-its-digital-currency-project-libra-as-it-tries-to-win-regulatory-approval/articleshow/75187155.cms">Project Libra</a>, later called Diem, has spooked authorities to a great extent. Furthermore, money laundering has always been a universal concern. <h2 style="line-height:1.38;margin-top:18pt;margin-bottom:6pt;"><cmsannotation type="cmsannotation" annotationid="Japan follows the global cue" comment="subhead" text="Japan follows the global cue">Japan follows the global cue</cmsannotation></h2> The BIS report is much more overt in its support for CBDC development, especially international interoperability. "It’s about making sure that in this new digital world, the financial system will remain competitive and open," said Benoît Cœuré, Head of the BIS Innovation Hub. Most countries with significant economic power are currently brainstorming and experimenting with the<a href="https://markets.businessinsider.com/currencies/news/jerome-powell-cryptocurrencies-cbdc-stablecoins-digital-currency-testimony-2021-7"> idea of a</a> central bank digital currency (CBDC). The Bank of Japan is exploring ways of issuing digital yuan. The solution could practically replace the existing notes and coins without any relative stability. The country hopes to match its global counterparts in a collective effort. <a href="https://forum.businessinsider.in/">For a more in-depth discussion, come on over to Business Insider Cryptosphere</a> — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve. SEE ALSO: <a href="https://www.businessinsider.in/tech/news/valve-steam-deck-price-in-india-specifications-launch-date/articleshow/84464421.cms">Valve’s Steam Deck handheld gaming device promises to bring the power of consoles in your hands</a> <a href="https://www.businessinsider.in/stock-market/news/tatva-chintan-pharma-chem-ipo-should-you-subscribe-to-the-ipo-check-out-analysts-review/articleshow/84464187.cms">Tatva Chintan Pharma Chem IPO -- Should you subscribe? Here’s what analysts are saying</a> <a href="https://www.businessinsider.in/stock-market/news/tatva-chintan-pharma-chem-ipo-heres-how-to-apply-via-banks-and-apps-like-zerodha-upstox/articleshow/84462586.cms">Tatva Chintan Pharma Chem IPO: Here’s how to apply via banks and apps like Zerodha, Upstox</a>

Japan is increasing vigilance on crypto — to hire more employees and explore CBDC

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><a href="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;ALID=2C0FQEHJGIUZ&amp;RW=1440&amp;RH=718#/SearchResult&amp;ALID=2C0FQEHJGIUZ&amp;RW=1440&amp;RH=718&amp;VBID=2C0FC03490L&amp;POPUPPN=4&amp;POPUPIID=2C0FQEHIDKI9">REUTERS/Benoit Tessier</a>Novak Djokovic celebrates with the French Open trophy after winning on Sunday.</div></div></div>Good morning! Here's what you need to know in markets on Monday.<a href="http://www.bloomberg.com/news/articles/2016-06-05/pound-drops-more-than-1-after-weekend-polls-show-brexit-favored">The pound slumped to a three-week low after polls showed more Britons favour exiting the European Union in the upcoming referendum on membership.</a> Bloomberg reports that sterling weakened against all 10 developed-market peers after two surveys showed more voters were willing to vote to leave the EU than those wishing to stay. The pound is down 0.91% against the dollar to 1.4388 at the time of writing (6.35 a.m. BST/1.35 a.m. ET).<a href="http://uk.reuters.com/article/uk-britain-manufacturing-eef-idUKKCN0YR0YN">Embattled British manufacturers expect a slight recovery in the second half of 2016 but that slow improvement could be knocked off course if the country votes to leave the European Union, an industry survey showed on Monday.</a> Reuters reports that a downturn across British factories eased in the April-June period but the pick-up was weaker than companies expected three months ago, industry association EEF said.<a href="http://www.businessinsider.com/r-stumbling-dollar-lifts-oil-prices-but-uptick-in-us-drilling-caps-gains-2016-6?IR=T">Oil is higher.</a> A plunge in the US-dollar after Friday's weak jobs report numbers is spurring fuel demand, although traders said plentiful supplies capped increases. Brent crude is up 0.85% to $50.06 (£34.79) at the time of writing (6.25 a.m. BST/1.25 a.m. ET) and US crude is up 0.99% to $49.10 (£34.12).<a href="https://www.theguardian.com/business/2016/jun/05/mike-ashley-agrees-to-appear-in-front-of-mps">Mike Ashley will go before MPs to "defend the good name" of Sports Direct on Tuesday in a change of plan just days after he said he would defy a parliamentary summons.</a> The Guardian reports that the billionaire founder of the retail chain has written to the Business, Innovation and Skills (BIS) committee to say that he had a change of heart after careful consideration over the weekend.<a href="http://uk.businessinsider.com/labour-mep-anneliese-dodds-regulation-symphony-goldman-sachs-fca-amf-2016-6">Labour MEP Anneliese Dodds is calling for tighter regulation of new Goldman Sachs-backed financial messaging platform Symphony and claims British and French watchdogs are currently investigating it.</a> Dodds sent a letter to Jonathan Hill, European Commissioner for financial services, and Steven Maijoor, head of the regulator ESMA (the European Securities and Markets Authority), regarding what she claims is the "danger [Symphony] poses to regulation and transparency."<a href="http://uk.businessinsider.com/r-credit-suisse-ma-chairman-denunzio-joins-wells-fargo-sources-2016-6">Longtime Credit Suisse investment banker David DeNunzio is leaving the Swiss bank to become global head of mergers and acquisitions (M&amp;A) at Wells Fargo, according to people familiar with the matter.</a> DeNunzio was formerly the global chairman of M&amp;A at Credit Suisse. At Wells Fargo, DeNunzio will partner with Sam Farnham, an investment banker who will be promoted to become head of M&amp;A in the Americas, the people added, requesting not to be named because the moves have not yet been announced.<a href="http://uk.businessinsider.com/grey-baker-is-leaving-gocardless-2016-6">A senior executive in charge of GoCardless's product and global markets is leaving the fast-growing London fintech startup after four years with the business.</a> Grey Baker joined the company in March 2012, <a href="https://www.linkedin.com/in/greysteil?authType=name&amp;authToken=dSz0&amp;trk=prof-sb-browse_map-name">according to his LinkedIn profile</a>, and has held the positions of head of analytics, head of operations, and vice president for engineering. His current title is VP product and head of global.<a href="http://www.businessinsider.com/r-blackrock-agrees-to-sell-singapore-office-tower-to-qatar-fund-for-25-billion-2016-6?IR=T">BlackRock has agreed to sell a 43-storey office building in Singapore to Qatar Investment Authority, a sovereign wealth fund, for S$3.4 billion (£1.7 billion, $2.45 billion), in what the US firm said was the largest-ever single-tower real estate deal in the Asia-Pacific region.</a> Asia Square Tower 1, located in the city-state's financial district, has over 1.25 million square feet of net lettable area and has Citigroup as its anchor tenant, BlackRock and Qatar Investment Authority said in a joint statement.<a href="http://www.telegraph.co.uk/technology/2016/06/05/deliveroo-revenue-to-hit-130m-this-year/">Deliveroo, the London-based food delivery network, is due to hit revenues of £130 million ($90.3 million) this year, solidifying its position as one of the UK's most-promising technology companies.</a> The Telegraph reports that the sales figure, an internal projection the company is understood to have shared with investors, represents growth of more than 1,000% in the last year, and comes as the company spreads across more than 65 cities.<a href="https://next.ft.com/content/7c862fb8-2977-11e6-8ba3-cdd781d02d89">Goldman Sachs attracted more than a quarter of a million applications from students and graduates for jobs this summer, suggesting fears of a "brain drain" in the sector may be exaggerated as banks introduce more employee-friendly policies.</a> The Financial Times reports that the number of applications from students and graduates globally have risen more than 40% since 2012, according to figures provided to the Financial Times. The data can include more than one application per individual. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/most-interesting-men-world-watches-rolex-breitling-jorg-gray-2015-8">These are the watches worn by the smartest and most powerful men in the world</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="N3NGJ0djpb_DdQzkXVopAvbq5AmmiuOx" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

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The decentralization promised by DeFi is an 'illusion' and a threat to global financial stability, BIS warns

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Japan is increasing vigilance on crypto — to hire more employees and explore CBDC

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