| On 2022-10-11 at 15:00:00 (Brussels Time) |
Abstract
At its core, Decentralized Finance is an effort to disintermediate financial markets through a combination of cryptographic solutions and incentive compatible designs. While still in early development, DeFi applications have grown rapidly over the last years. As a result of the large volumes of associated capital, policy makers and financial authorities are turning their attention to the risk and opportunities posed by this trend. Are DeFi services fundamentally different from traditional finance? Should policy frameworks adapt to the specific nature of DeFi systems? How could public actions promote synergies and ensure sustainable interactions between DeFi, traditional finance and the real economy? In addressing those questions head on, this report provides a rationale for the presence of public support in the DeFi ecosystem. Building on standard arguments from the literature on the origins and consequences of financial intermediation, the report establishes a set of key distinctive features between traditional financial markets and DeFi. The conceptual contribution of the report is to position the treatment of information at the center of analysis and to show how such a process differs between traditional and decentralized financial systems. Relying on this information framework, the study highlights conditions under which specific public initiatives may be warranted from a welfare perspective and feasible from a technological perspective. As a result, the report proposes implementable solutions to foster economic growth and financial stability for DeFi systems as well as promoting complementarities between DeFi and the economy as a whole. Short Bio of the Speaker
Tarik is an Assistant Professor of Finance at the Faculty of Economics and Business (KU Leuven). His research focuses on the interactions between financial markets, new technologies and policy. As such, he is interested in (i) how new technologies transform (or not!) financial interactions and (ii) how financial constraints condition the development of new technologies. In the past, Tarik was a visiting researcher at the National Bank of Belgium and European Systemic Risk Board, a research consultant at a major European bank and a visiting scholar at the European Central Bank, the Deutsche Bundesbank and De Nederlandsche Bank. He was also Postdoctoral Research Associate at the Massachusetts Institute of Technology (Media Lab) and visiting scholar at the University of Stanford (Economics), the University of Oxford (Said Business School) and the University of Cambridge (Isaac Newton Institute). Tarik has a background in Engineering, Computer Science and Finance from the Université Libre de Bruxelles - Brussels - (B.Sc., M.Sc. and Ph.D.).
