Benoît Cœuré, chief of the Bank for International Settlements’ (BIS) innovation hub, told the Financial Times that conversations about global crypto and decentralized finance (DeFi) have “intensified.”

Cœuré, who has served on the board of the European Central Bank (ECB), said that regulators should agree on a global framework for the digital asset space now that they’ve been given a “wake-up call” from the rise of DeFi.

According to FT, Cœuré said that it “wasn’t necessarily the wrong decision” for regulators to allow the market to develop and to garner an understanding of “how crypto assets work”.

“But now that it is really growing very fast and . . . becoming mainstream in different ways, then certainly the time for consistent regulation has come.”

Cœuré said that DeFi “opens new avenues . . . for interconnectedness with traditional finance which creates potentially new forms of systemic risk” that according to him, regulators can no longer ignore.

“These [new] services will be competing with traditional finance, and money will flow in and out from one universe to another. This creates a compelling reason to start a discussion on global principles for crypto regulation.”

The banker said that a global framework for crypto regulation was necessary especially because of the risk of “regulatory arbitrage,” whereby crypto companies end up placing different components of their business in different parts of the world in order to gain an advantage.

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“The risk in 2022 is that large jurisdictions [like] Europe, the UK, the US, China, keep moving on but along different tracks and produce a system which is globally inconsistent… That’s a risk that should be avoided and there’s still time to avoid it.”

“The final decisions of sovereign states will be . . . a balance between sovereign strategic considerations on the one side and considerations about the good functioning of the financial system on the other,” he said.

“That’s not new, it’s just that . . . these balances are shifting because technology is so important. The new risk is governments raising technological fences which create fragmentation in the global financial system.”

As per the FT report, Cœuré said that central bank digital currencies (CBDCs) were not being viewed by regulators as a separate discussion from the rest of the digital asset industry.

“We’re seeing the discussion pivoting . . . towards CBDC (central bank digital currency) being . . . a foundational contribution to the new ecosystem,” he said.

“You need central bank money as a safe asset that can be used as a settlement asset to make the new system stable . . . It’s not about CBDC being the sovereign alternative to private money, it’s more about CBDC being the glue that will hold the system together.”

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