Weekly Update — DeFi Regulation. 15/8–12/22/2021

5 min readDec 22, 2021

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DeFi Regulation News

Neither ban nor regulate crypto

The government must simply make it clear that India will never permit cryptocurrencies to be currency. Nearly 15 million Indians are supposedly investing in and betting on cryptocurrencies, the value of which swings wildly, purportedly putting these investors and the financial system at risk. The value for cryptocurrency stems from the hope that it will eventually be a socially accepted medium of exchange or legal tender. It is neither feasible nor wise nor wise to ban or stop there and stop there there is no need for a ban on the currency.

Crypto regulatory framework from Financial Stability Board could come in 2022

Benoit Cœuré, who heads the BIS Innovation Hub, suggested the Financial Stability Board is the most likely forum for global regulators to agree on a consistent regulatory framework for crypto-assets. He said a regulatory framework could be put together in 2022, although it would take two to three years to be implemented across jurisdictions. DeFi has grown from $1 billion in assets in June 2020 to $234 billion today (DeFi Llama) DeFi enables cryptocurrencies to be traded or lent without a centralized intermediary, apart from software code.

Warren: DeFi ‘Most Dangerous’ Part of Crypto

Sen. Elizabeth Warren said decentralized finance, or DeFi, is “the most dangerous part of the crypto world” Warren also took aim at Tether, the company that issues the tether, the stablecoin. Half of all bitcoin trades are executed using the largest stablecoin, tether, with a market capitalization of $76 billion. On Dec. 14, the 24-hour bitcoin trade volume was $32.7 billion; tether’s market cap was only $4.6 billion.

Financial Stability Group Warns of Stablecoin, DeFi Risks in Annual Report

Financial Stability Oversight Council met Friday to discuss financial stability issues. The group was formed after 2010 to monitor potential risks to the U.S. financial system. FSOC punted on whether the group would take any specific crypto-related actions. The $127 billion stablecoin market carries its own “operational, settlement and liquidity” risks that may be amplified as “network effects” drive ever more users in the market. The more “traditional financial institutions” plug into these crypto markets, the greater a risk this contagion could “spread to the broader financial system”

Senators Ready to Write Clarifying Legislation to Maintain U.S. Leadership in Crypto

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Govt set to defer introduction of crypto bill in Parliament

India’s much-awaited cryptocurrency bill is unlikely to be presented in the ongoing session of Parliament. The government has yet to finalize details of the legislation, according to people with knowledge of the matter. The bill proposes to help the central bank create an official digital currency. India with nearly 1.4 billion people is one of the world’s fastest-growing markets for cryptocurrency trading. The central bank had effectively banned crypto transactions in 2018, but the Supreme Court struck down the restriction last year.

With eye on 2021 law, crypto industry to ‘engage’ with Congress in 2022

The cryptocurrency industry plans to spend next year building on 2021’s record political engagement. Advocacy groups said cryptocurrency reporting requirements in the infrastructure package this year were a wake-up call for many in the industry. Many companies hired outside lobbying firms and beefed up in-house government relations staff in the wake of the law. House Financial Services Chairwoman Maxine Waters convened cryptocurrency executives for a hearing this month that she said would give the committee information to “make the right decisions” when it comes to overseeing the sector.

Treasury Says New Law Only Way to Fully Contain Stablecoin Risks

Nellie Liang, Treasury undersecretary for domestic finance, says regulators need action from Congress to address risks posed by stablecoins. Stablecoins are a fast-growing type of cryptocurreny whose value is pegged to another asset, like a traditional currency or commodity. Currently, they serve mostly as a digital-currency bridge for investors seeking to trade in cryptocurrencies like Bitcoin, whose values can fluctuate wildly. Liang: “If these are foundational to crypto assets and they aren’t stable, that could potentially be a big risk”

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