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Journal Article
Decentralized Finance (DeFi): Transformative Potential and Associated Risks
Financial services in the crypto finance world are provided by a combination of centralized finance (CeFi) organizations and decentralized finance (DeFi). CeFi's are roughly similar to traditional financial intermediaries, but DeFi seeks to provide services using smart contracts (computer code) rather than an intermediary. DeFi's unusual structure creates some interesting potential but also raises new risks in addition to those already inherent in blockchains and crypto finance. This paper reviews some of the opportunities and risks.
Discussion Paper
The stable in stablecoins
Stablecoins have garnered much attention as a key part of the emerging decentralized finance (or "DeFi") ecosystem, and as a potential way to pay for goods and services. Stablecoins facilitate trades on crypto exchanges, serve as the underlying asset for many crypto loans, and allow market participants to avoid inefficiencies stemming from converting back to fiat currency for crypto trades.
Working Paper
Tokenization: Overview and Financial Stability Implications
In this paper we outline tokenization, which is a new and rapidly growing financial innovation in crypto asset markets, and we discuss potential benefits and financial stability implications. Tokenization refers to the process of constructing digital representations (crypto tokens) for non-crypto assets (reference assets). As we discuss below, tokenizations create interconnections between the digital asset ecosystem and the traditional financial system. At sufficient scale, tokenized assets could transmit volatility from crypto asset markets to the markets for the crypto token's reference ...
Discussion Paper
The stable in stablecoins
Stablecoins have garnered much attention as a key part of the emerging decentralized finance (or "DeFi") ecosystem, and as a potential way to pay for goods and services. Stablecoins facilitate trades on crypto exchanges, serve as the underlying asset for many crypto loans, and allow market participants to avoid inefficiencies stemming from converting back to fiat currency for crypto trades.
Report
The Financial Stability Implications of Digital Assets
The value of assets in the digital ecosystem has grown rapidly amid periods of high volatility. Does the digital financial system create new potential challenges to financial stability? This paper explores this question using the Federal Reserve’s framework for analyzing vulnerabilities in the traditional financial system. The digital asset ecosystem has recently proven itself to be highly fragile. However, adverse digital asset market shocks have had limited spillovers to the traditional financial system. Currently, the digital asset ecosystem does not provide significant financial ...