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'Decentralization Illusion': Central Bank Group Urges Regulation of DeFi Crypto Platforms (cnbc.com) 60

Posted by msmash from the closer-look dept.
The central bank of central banks is worried about "decentralized finance." From a report: The Bank for International Settlements, an umbrella group for central banks, said in a report this week that it's concerned there's a "decentralization illusion" in DeFi. DeFi is a rapidly-growing part of the cryptocurrency market that promises to deliver traditional financial products like loans and savings accounts without involvement from regulated middlemen such as banks. But regulators are increasingly concerned about platforms offering DeFi services that may not be as "decentralized" as advertised.

"What we found is that, first, the decentralized aspect tends to be illusive," Agustin Carstens, general manager of the BIS, told CNBC's Julianna Tatelbaum Tuesday. "There are some incentive issues related to the fact that, through this decentralization, at some point you end up with some agents that play an important role, and not necessarily for the best [interests] of users of financial services." The central bank group did not mention any specific names related to its concerns.
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'Decentralization Illusion': Central Bank Group Urges Regulation of DeFi Crypto Platforms More

'Decentralization Illusion': Central Bank Group Urges Regulation of DeFi Crypto Platforms

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  • Best interests... (Score:4, Insightful)

    by Omega Hacker ( 6676 ) <omega@omegacsCOMMA.net minus punct> on Wednesday December 08, 2021 @11:14AM (#62059261)
    They say this like they aren't the "agents that play an important role" in traditional banking and/or they always prioritize the best interests of users of financial services.... LOL. Pot/kettle much?

    • Re: (Score:2)

      by splutty ( 43475 )

      That... Is exactly their point. The so called 'decentralized' ones aren't, because they use the same services as the centralized ones do.

      • If that were true, the banks wouldn't be complaining.

    • Regulators prevent abuses and they prevent companies from taking massive risks with our entire economy that cause enormous market crashes. The market is crashed every 10 years since I was born like clockwork and every single crash can be traced to something that The regulators were warning us about and we were ignoring them. We were about to have another crash right before covid hit, but the Trump administration pumping massive amounts of cash into the stock market in both direct and indirect subsidies in o

      • Thanks for that. The general I hate The System crap gets on my nerves too

      • Most of those crashes were caused BY "the system".

        • Which is why I pointed folks in the direction of fixing it. To be fair we also need to overhaul our political system. Passing the John Lewis Voting Rights Act is a good start. Adding seats to the Supreme Court too. Ranked choice voting too, and do away with the Senate and move to a proper Parliament system that can't be easily circumvented. All that not necessarily in that order.

          Democracy is like any other complex machine, sometimes it needs maintenance.

          • When all the regulators are groomed by Goldman, you're insane for thinking that reform-from-within will be effective.

      • <quote>It's so frustrating to see nerds of all people here on /. buying into this anti-intellectualism and disdain for people who have actually taken the time to learn about a subject...</quote>

        I can't tell if you're lumping me in with that, but that wasn't my point at all. I am strongly in favor of regulators smacking down the greedy bullshit invented finance we keep seeing, and wish we'd pay more attention to well-structured regulations in general. Unfortunately our current batch of regulators

      • The last big financial crisis happened for what reason?

        Banks were basically gambling with their customers money, leading to the subprime mortgage crisis. Then they try to screw their customers at each opportunity. I can't tell you how many letter's I've received from my and other banks encouraging me to "fulfill my dreams" by taking a loan. That is such an irresponsible thing to do. Then you get insignificant interest on the money you give them, but you pay 16% or more on the money you owe them. They try to

        • Individual homeowners didn't cause the 2008 crash. What caused the 2008 crash is that large financial investment firms or taking large numbers of mortgages and selling them as a security and then swapping that security or parts of that security around. This made mortgages incredibly valuable which caused Banks to give out mortgages that want affordable. This was done at the same time that housing prices were skyrocketing because the inventory built in the seventies and eighties had been burned through and g

      • Regulators prevent abuses and they prevent companies from taking massive risks with our entire economy that cause enormous market crashes. Blah blah blah, bitcon bad, regulation good, freedom bad, government good, yadda yadda.

        Let me share with you this one weird trick that protects you from being scammed by this horrible unregulated bitcoin. Don't believe me? Billions have tried it and each and every one can confirm it works!

        Ready?

        Step 1: Do not invest in Bitcoin
        Step 2: no there's no step 2, it really is AS FUCKING SIMPLE as that.

  • Citibank, USBank, Bank of America, Truist, ...

  • at some point you end up with some agents that play an important role,

    As Porter says in the movie Payback "You go high enough you always come to one man"

  • That some different DeFi instruments may rely on a central entity individual to a specific instrument who are not the World bank centralizers approved by the centralizers of centralizers.

    In other words: Centralization is scary when it's someone else on a single instrument... But it's fine over the past hundred+ years when it's a Cartel of the few world banks working together to centralize everything ?

  • It should be. That was a massive word salad of nothing and decentralised finance is anything but illusive - it hasn't even started. The world simply does not need central banks or a set of financial institutions that are a long way past their use-by date. As Adam Smith said, money is a question of belief. The grip of fiat is slipping fast.

    • Re:It's Afraid (Score:5, Insightful)

      by oh_my_080980980 ( 773867 ) on Wednesday December 08, 2021 @11:58AM (#62059477)
      The grift is strong with you.

      When you can't print money, you're economy is fucked.

      When you can't take on debt, your economy is fucked.

      When ass-holes don't understand the role a central bank plays in your economy, you are royally fucked.

      • Re: (Score:2)

        by DarkOx ( 621550 )

        I fully understand it. Its the role of vipers gambling with the economies bread stuffs.

        If you can take on debt than you have no need for direct monetary expansion! Money will be lent into existence. If you can't take on debt that is a political problem not monetary one.

        If the wealthiest members of your society don't believe investing its governance through lending as necessary and the general public won't support taxation to cover the costs; a backdoor way to collect a hidden tax isn't the correct solution

        • If you can take on debt than you have no need for direct monetary expansion! Money will be lent into existence.

          How is money lent into existence with a non-fiat currency, e.g. BTC? Or is that not what you're talking about?

      • Negative. When you can't print money, the government is constrained to what they can actually collect in taxes, leading to fewer boondoggles and money-wasting-programs. This prevents it growing out of control (like it has/does without a Gold standard). When you can't take on debt you have to live within your means. When "assholes don't understand" how a central bank works, that central bank monetizes debt to the moon until they have an inflationary collapse. You know, like the dozens that have happened thro
        • It's amazing how many people think money printing is somehow essential. They're going to die in poverty.
          • Iknowrite? I just want to ask them this: if it works so well why not just do it all the time? Why not print money for everything the government does and just blow off collecting taxes? I mean, we aren't far from that now. We get @$3T in taxes and spend $4-8T depending on who's accounting you believe. If living off debt is so great, why doesn't everyone do it? It's like proposing that everyone should just quit work and live off their credit card. It works.... until it doesn't.
      • Ha, ha, ha, ha, ha, ha, ha, ha, ha. Apart from the centuries where central banks didn't exist and the prosperity there was before the Federal Reserve. What morons we have around today...
  • until they lose, then they ask where was the protection and regulation that could have stopped the fleecing of the speculators. All the cryptos want someone to backstop them so they can continue the fleecing, but they don't want the associated regulation.
    • Comment removed based on user account deletion

    • Re: (Score:2)

      by endus ( 698588 )

      Agree completely but in today's world "regulation" does not necessarily imply controls which benefit the consumer either. Both the government and private industry are in it to exploit the average person to the greatest degree possible.

  • "Deranged fantasy" would fit better. Yes, these banks have a stake in things. But they are not threatened, because they _know_ this "alternative" is anything but. Of course, the usual fanatical half-whits are not equipped to even begin to understand that.

  • I've heard that cryptocurrencies could be a substitute for traditional banking. Can anyone here clarify this? -- Asking for a friend, Collin Robinson.

    • Re: (Score:2)

      by splutty ( 43475 )

      No. (To both your questions).

    • Re: (Score:3, Funny)

      by Powercntrl ( 458442 )

      I've heard that cryptocurrencies could be a substitute for traditional banking. Can anyone here clarify this?

      1. Invest everything you have in some random new shitcoin.
      2. ..and it's gone!
      3. Congratulations, now you no longer need a traditional bank.

  • Great example of an intractable modern problem (Score:3, Insightful)

    by endus ( 698588 ) on Wednesday December 08, 2021 @12:29PM (#62059623)

    The banks who are fucking us now are expressing concern that unregulated upstarts operating beyond their reach who are a threat to their hold on us are going to fuck us in the future.

    No easy answer to who to believe in this scenario.

    Although, maybe there is - neither one of them.

    • Postal banking. It's not an intractable problem it's a completely solvable problem. Also when economists tell you what regulations are needed to prevent cyclic economic collapses listen to them dammit. Elizabeth Warren has written several books explaining in detail at a level that lay people can understand what's needed to prevent these economic crashes and at best we ignore her and it worse we sneer at her. These aren't even her ideas, she's just trying to package them in a way folks can understand. Every

      • Postal banking? Yeah okay. Let's find a new way for the USPS to lose money.

        • Let's find a new way for the USPS to lose money.

          Still less likely than losing the password to your crypto wallet.

          • . . . and? Do you have a point to make here? Doesn't look like it.

            It's not an "either or" kind of thing. And the absurdity of positing postal banking as a solution for international banking and boom/bust economies is a complete joke.

        • Postal banking is actually a revenue option that helps the poorer Americans. About 30 million Americans rely on check casing services. For one factor or another don't own banking accounts rely on check cashing services that charge fees which are usually near from 2% to 5%. This is a demographic that almost entirely dependant on welfare in some form or another so if someone's taking a cut out of each paycheck, it's translating into a greater dependence on welfare.

          If the USPS provided more banking services, t

          • It is not a "revenue option". It's a way for the USPS to offer bank accounts to people who are unbanked because their credit scores are so bad that commercial banks won't even do business with them.

            Which means, overall, the USPS stands to lose a lot of money unless they charge exorbitant fees for their services.

      • Re: (Score:2)

        by endus ( 698588 )

        Let's pretend for a second that there aren't legitimate ideological issues around economic policy (which there definitely are) for a second and say that everything warren says is 100% correct.

        You still have a government which is *fundamentally* corrupt and untrustworthy as the vehicle to implement them. You've got your pristine white tuxedo ready to look great at the ball, but to get there you have to swim through a body of dog shit the size of the pacific ocean.

        None of these issues can be separated from o

        • I agree with the spirit of what you are saying and with your summary of all the untrustworthy entities. I just don't think that any of this matters much because of the power delta between the crypto upstarts and governments, central banks, and politicians of all stripes. They know damn-well that if they allowed crypto to subsume their local currency they would lose central bank control of interest rates and their ability to manipulate the money supply. I just don't see any way under the Sun that bankers and
    • That's akin to them saying "They might do to you what I AM doing to you." When someone shows you who they are, believe them.
  • They clearly want to use that term to mean decentralized everything which can't happen i don't think. What is decentralized about these platforms is instead of the exchange using its own reserve of crypto to facilitate conversions, it uses crypto from other people who chose to put they money there in order to gain conversion fees. Same thing with lending. People lend others crypto so they can reap interest on the loan. You can call this "delegated" finance if you will. My point is it has been around and cle

  • A lot of people on here don’t have a clue about what DeFi brings and why is growning.

    You have three types of marginalized people here that are being cut out of the greater finance system. The first is the poor in third-world countries, then comes poor in industrialized countries, and then the middle class workers. This probably represents 98% of the world’s population.

    The people in third-world countries don’t have access to stable banks in the first place, they don’t even have the

    • I like the idea of a lot of what you say, but it sounds almost exactly like tens of thousands of posts made on slashdot 20-24 years ago, when all of us early-adopters of Internetworked telecom thumped our chests and proclaimed that the Internet was going to democratize information and disrupt the political/ruling classes and make everyone free (as in speech) and probably eventually free (as in beer) as well.

      And here we are, less than a quarter-century from when it first became a powerful information-sharing

  • ... it's pretty darned centralized after all. (Filecoin, last I knew)

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