Lessons from the crypto winter
DeFi versus CeFi
This paper analyses the mechanisms involved in the recent failings in crypto-asset
markets, focusing on events in 2022 through September. The paper assesses the role
of centralised finance (CeFi) and decentralised finance (DeFi), and the disproportionate
impact the crypto market turmoil has had on retail market participants. It examines
learnings of the recent crypto-asset market downturn, also know as the “crypto winter”,
including high interconnectedness within the crypto-asset ecosystem; elaborate mechanisms
of financial engineering that heavily use leverage and are built on the composability
offered by DeFi (i.e., components of DeFi are pieced together to create new products);
and increased market concentration. The paper also highlights the urgency for policy
action and provides policy recommendations.
Published on December 14, 2022
In series:OECD Business and Finance Policy Papersview more titles