Over the past few years, crypto has emerged as a powerful force in the financial world. With its decentralized structure and ability to facilitate peer-to-peer transactions, crypto has the potential to upend traditional finance. One of the most promising applications of crypto is in the area of decentralized finance, or DeFi. DeFi is a rapidly growing field that utilizes crypto assets and smart contracts to provide a variety of financial services. These services include lending, borrowing, and trade execution, among others. While the potential of DeFi is great, there are also some challenges that need to be addressed. One of the biggest challenges is identity verification. Due to the pseudonymous nature of crypto, it can be difficult to verify the identity of users.
As was mention in this article posted by CoinDesk, Eddie Yue, the CEO if the Hong Kong Monetary Authority, told a G20 meeting that crypto and decentralized finance will remain a significant force. That would be true given they operate on technology that makes intervention extremely difficult and provide significant value despite the obvious problems with the current solutions, such as lack of identity and fraud management, limited inter-operability between the currencies, blockchains, smart contracts and Oracles. There is also very little discussion today regarding how current payment systems could be integrated into the blockchain-based solutions using tokens, which would solve multiple problems:
“Hong Kong Monetary Authority (HKMA) CEO Eddie Yue thinks cryptocurrency and decentralized finance (DeFi) will continue to play an important role in the financial system despite the recent instability in the sector.
Speaking during a meeting of G20 financial officials, Yue called for greater regulation of the crypto industry to prevent another crash like the collapse of algorithmic stablecoin terraUSD (UST) and its companion token, LUNA, reports FinBold.
“Despite the [UST-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,” Yue said.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group