The Bank of Canada published a staff note on decentralized finance (DeFi) on Oct. 17, assessing the innovations that made it popular and the challenges and risks associated with its use.
The staff note described DeFi as a multi-layered structure, with the Ethereum blockchain serving as the bottom layer (or settlement layer). Developers construct a variety of tools and services on top of the main blockchain, including tokenization, lending and borrowing services, and much more.
DeFi architecture. Source: Bank of Canada
The staff note shed light on the rise in popularity of the DeFi ecosystem starting in 2020 and how it became an integral part of the crypto economy, with billions in volume over the next few years. The popularity of the ecosystem took a dip starting in 2022 with the collapse of multiple key crypto platforms with significant DeFi exposure, including Terra.
Talking about the key features of the decentralized ecosystem, the staff note lauded DeFi’s “composability,” which allows the apps and services in the ecosystem to interconnect. The Bank of Canada note highlighted three of the key areas where DeFi can transform the financial system:
Frictionless financial service offering: A decentralized ledger-based system reduces frictions experienced in the legacy system and expands the scope of financial services currently being offered.
Open competition: The DeFi ecosystem is open to everyone to build and access, given its open-source nature; thus, it makes way for increased competition, offering better options for the end user.
Transparency: The use of programmable smart contracts eliminates intermediaries and increases transparency in the system, as everything is accessible to people analyzing it.
Apart from the key DeFi innovations that can transform the traditional financial system, the staff note also talked about the challenges and risks associated with the DeFi ecosystem, claiming that “despite its innovations and possibilities, the overall economic benefits of DeFi remain limited.”
The note lists three key challenges that the DeFi system faces today: the lack of real-world tokenization, the higher concentration of interconnection within, and its dependence on the unregulated centralized finance ecosystem.
The note also highlighted the regulatory challenges posed by the DeFi ecosystem and the rise in vulnerabilities in the ecosystem, leading to several hacks and exploits. The note claimed that “the anonymous and borderless nature of public blockchains complicates regulatory oversight.”
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After days of furore directed at Rishi Sunak for the election betting scandal, now a Labour candidate is under investigation by the Gambling Commission for his own betting activity – and is immediately suspended.
Is this an equaliser in one of the grubbiest electoral sagas of recent elections? Quite possibly not.
There is no doubting the utter dismay in Labour HQ at the revelation that they too have a candidate caught up in the betting scandal.
However, if this scenario is as presented, it is hard to see an allegation being mounted that he had insider intelligence on the race – unless it can be proved he was deliberately setting out to lose.
An under-pressure Gambling Commission will investigate every candidate’s name on the spreadsheet from gambling companies of those who placed bets – but it is unclear from available facts where this will go.
The Tory betting saga, however, is more complicated and now on its 13th day.
It was almost two weeks ago that Craig Williams – Rishi Sunak’s closest parliamentary aide and former Montgomeryshire MP – admitted he had placed a bet on the election date – a date he might have known before the public at large.
He denies he committed any offence, and remains under investigation.
Laura Saunders, standing for the Tories just south in Bristol North West, has also been suspended for putting a bet on the date when her partner worked in Conservative headquarters on the election.
For most of that time, Mr Sunak has been insisting he could not suspend either candidate because of the ongoing probe by the Gambling Commission.
Ministers, as well as opponents, weighed in.
And on Tuesday he reversed that decision under that pressure.
This means there are questions about the prime minister’s own judgement and unwillingness to act on top of questions about the behaviour of those closest to him.
Image: Craig Williams and Laura Saunders have both been suspended from the Tories. Pics: PA/Laura Saunders for Bristol North West
This story has had massive cut through with the public, topping the charts for any news story in the UK – according to YouGov’s AI news tracker – for the last four days.
There is dismay from the cabinet downwards.
Labour’s own problems have undermined their own ability to go on the attack. But it is not clear that voters will see the two issues on the same scale.
The full list of the candidates running for Central Suffolk and North Ipswich is:
Charlie Caiger, independent; Tony Gould, Reform UK; Mike Hallatt, independent; Brett Alistair Mickelburgh, Lib Dems; Dan Pratt, Greens; Patrick Spencer, Conservatives.
The full list of candidates for Bristol North West is:
Caroline Gooch, Lib Dems; Darren Jones, Labour; Scarlett O’Connor, Reform UK; Mary Page, Green Party; Ben Smith, SDP.
The full list of candidates for Montgomeryshire and Glyndwr is:
Jeremy Brignell-Thorp, Green Party; Oliver Lewis, Reform UK; Glyn Preston, Lib Dems; Elwyn Vaughan, Plaid Cymru; Steve Witherden, Labour.
Four men have been arrested on suspicion of aggravated trespass in the grounds of the prime minister’s home, police have confirmed.
The incident took place at Rishi Sunak’s constituency address in Kirby Sigston, North Yorkshire, while he was attending events in London to mark the Japanese state visit.
A police statement said officers were “with the four men within one minute of them entering the grounds”.
The arrests are connected to a protest by campaigners from Youth Demand. It describes itself as a group of young people who want “the Tories and the Labour Party commit to a two-way arms embargo on Israel, and to stop all new oil and gas licences”.
A spokesperson for the group said three of those arrested were taking part in the demonstration, while the fourth person was an independent photographer.
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A North Yorkshire Police spokesperson said: “They were detained at around 12.40pm before being escorted off the property and arrested on suspicion of aggravated trespass.
“The men, aged 52 from London, 43 from Bolton, 21 from Manchester, and 20 from Chichester, remain in police custody for questioning and enquiries are ongoing.”
It comes after a separate incident last summer, when protesters scaled the roof of Mr Sunak’s home.
They held up banners which said “NO NEW OIL” and draped the building in fabric. It happened while the prime minister and his family were away on holiday in California.
Amy Rugg-Easey, 33, Alexandra Wilson, 32, Michael Grant, 64, and Mathieu Soete, 38, have pleaded not guilty to criminal damage, with a two-day trial set to take place in July.