Crypto and DeFi could be key to the ‘future financial system’, HKMA CEO says

Regulatory spotlight on the crypto sector has increased over the past few months following the unfortunate events around the collapse of the Terra stablecoin and dramatic fall of some major centralised finance (CeFi) companies.

But as regulators mull the next steps  amid the rallying call from across the board for proper regulatory steps – especially for the stablecoin market – a finance expert has said there’s a need to recognise the potential importance of the technology that drives these innovations.

According to Hong Kong Monetary Authority (HKMA) chief executive officer Eddie Yue, crypto and decentralised finance (DeFi) “won’t disappear.” In fact, these innovations could be critical to the future of the global financial system.

In remarks quoted by Reuters, the HKMA chief said:

Despite the Terra-Luna incident I think crypto and DeFi won’t disappear – though they might be held back – because the technology and the business innovation behind these developments are likely to be important for our future financial system.”

Easier to regulate stablecoins and crypto exchanges

The HKMA chief also believes that the best way to regulate the stablecoin market is to ensure compliance across stablecoin issuers and crypto exchanges.

In comments during a G20 finance officials meeting in Indonesia, Yue explained that this approach will likely be more successful given that cryptocurrency exchanges and leading stablecoins are the gateway to the world of DeFi. If this succeeds, it would help prevent any potential risks to financial stability from stablecoins and the DeFi ecosystem.

The call for enforcement of regulatory compliance was also reiterated last week by US Securities and Exchange Commission Chair Gary Gensler.

According to the SEC Chair, the public can enjoy better protections if crypto exchanges, lending platforms, and broker-dealers were to come under greater compliance requirements.

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