Brian Brooks, the acting comptroller of the Currency (OCC) highlighted that in the evolution of the DeFi (decentralized finance) applications and their adoption, the policymakers need to analyze and redesign the banking regulations.
A new era is on the rise, where banks will be entirely composed of Softwares and regulators should be capable enough to handle the looming reality.
Brooks mentioned in the Financial Times, that policymakers are required to put limitations on the technology ( and algorithms) itself rather than people who handle it. Brooks stated that
“We call it bank regulation, but we’re really regulating bankers.” The rise of the DeFi brings about new opportunities and challenges.
Without a clear understanding, federal regulatory can merely develop a “patchwork of inconsistent rules that impede the orderly development of a national market. ”
Software-based banks can be effectively and satisfactorily monitored and audited just like human-driven banks. For this purpose, the federal regulators need to be trained in assessing and testing various algorithms and related technical know-how of the system.