Thread by @joel_john95

Prior to G20 meeting in Osaka, it seems the Financial Stability Board has issued their report on decentralised financial technologies. They have summarised definition and after effects for permissioned and non-permissioned networks alike. Summarising key points in a thread.

Quick Context - During the last G20 summit, the FSB was to release metrics around key numbers banks had to disclose around exposure to the token market. Given the slump, that may have not happened. Here's their statement from March 2018 - fsb.org/wp-content/upl…

The new report defines decentralisation in three broad scenarios for financial markets

1. Decision making aka governance (DAO?)
2. Decentralisation of risk taking - aka platform risks (DEX?)
3. Record keeping - aka data storage and custodial risks (DIDs ?)

They don't really differentiate between token based fintech innovations and macro developments in Fintech. No differentiation between permissioned and non permissionless either.

According to the FSB, immediate use-cases that will benefit from decentralisation of financial services will be payments and settlements (duh), trade finance (there are some pilot cases) and capital markets (may be alluring to STOs)

There is, of course a mention of lending but it allures to new age mechanisms of credit scoring instead of token backed loans. Tough luck defi folks

It feels as though their risk section was based off the DAO hack of 2016. That said - challenges in accountability, resolution and legal risks plague DAOs even in 2019. Things to address for the ecosystem if we are to progress 🤔

Broadly, they seem aware of the benefits DLTs offer the traditional banking ecosystem but are sceptical of the challenges involved in execution. Again, slightly annoying that the lines are blurry between permissioned and permissionless ledgers..

There is a shout out to stable coins but it comes with a negative connotation attached to it. Clearly, someone needs to send them a memo that stablecoin on-ramps and off-ramps can be highly regulated entities. (I have the stats if you want to draft a memo)

They then proceed to mention legal challenges caused due to faster, unchecked flow of currency. Somehow, this makes me believe there could be a move to create a global taskforce for monitoring digital assets in the future.

To give credits where its due - they do give some reasonable examples. The World Bank's bond-i bonds being one (anyone has volume data on those?)

And they did nail this bit where they addressed the idea that tokenising everything may not be the smartest approach

The document ends with a note on the need for regulators to consult with industry players and the need for issuing common standards in coordinating effort toward regulation. Hey @RBI - maybe something you would want to do?

Here's the entire link to the document - fsb.org/wp-content/upl…