DeFi Will Usurp Legacy Banking Says U.S. Currency Chief

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  • Developments in DeFi will eventually see banks being sidelined, says Brian Brooks, the acting U.S. Comptroller of the Currency
  • Brooks likened the DeFi/bank battle to the email/postal service battle
  • Humans need “financial services” not banks, says Brooks

The services offered by traditional banks could be rendered obsolete by decentralized finance (DeFi) according to Brian Brooks, the acting U.S. Comptroller of the Currency. Speaking earlier this week at DC Fintech Week, Brooks compared the threat that DeFi poses to traditional banking with the threat that email presented to the postal service in the 1990s and claimed that the “central ledger keeper” role that banks play would eventually be made redundant.

Brooks Predicts DeFi Dominance

Brooks was speaking to DC Fintech Week founder Chris Brummer about the role of currency in a digital world, when the subject of DeFi came up. Interestingly, Brooks predicted a time not too far from now in which the existing legacy banking system is displaced and potentially even replaced by distributed ledger technologies:

We…see a future where decentralization is very likely an unstoppable force out there. Decentralized networks, by definition, are cheaper, faster, and more resilient than any kind of centralized structure.

Brooks’ office has taken a notably pro-crypto stance in 2020, ruling in July that financial institutions were allowed to offer digital currency custody services to clients, noting in the same report that, “Fiat money refers to instruments that do not have intrinsic value”.

Humans Can Be Their Own Bank

Brooks also compared the legacy banking system to the postal service, saying that the advent of email allowed individuals to be their own “aggregators”, meaning they could circumvent the post office and ‘deliver’ the mail electronically themselves. If done well, Brooks says, DeFi has the potential to remove banks as the financial aggregator, allowing individuals to conduct a myriad of transactions themselves and not rely on a central record keeper.

Brooks, who was formerly Chief Legal Officer at Coinbase, summarized his thoughts by saying that, “Human beings need financial services, they don’t need banks.” Such a utopian view of DeFi is exactly what fans of the space have been predicting for some time, although if the current DeFi market is anything to go by, this vision is some way off to say the least.