Summary
BIS has been exploring DeFi and tested cross-border trading with digital currencies and DeFi elements in 2023. They have concerns that DeFi could make financial markets more volatile and not solve issues with dominant intermediaries.
Key Points
1. The BIS has been actively involved in exploring the DeFi space, including conducting successful tests with central banks of France, Singapore, and Switzerland in 2023.
2. In 2022, the BIS published two papers highlighting concerns that DeFi could potentially lead to more volatile financial markets and may not address the issue of large intermediaries dominating the industry.
3. The BIS has specifically tested cross-border trading of wholesale central bank digital currencies and DeFi elements like automated market makers, indicating a growing interest in understanding the implications of decentralized finance on traditional financial systems.