One member of the Bank of England’s policy committee has expressed doubt that DeFi really represents a decentralized system

In a speech on Wednesday, an external member of the UK’s central bank’s financial policy council described identified difficulties in the governance of decentralized finance.

Wednesday, a top adviser to the Bank of England warned that decentralized finance is not as decentralized as it promises to be in a lecture at the Blockchain Research Center at University College London.

An external member of the central bank’s financial policy council and a former head for Canada’s central bank, Carolyn Wilkins, cautioned that “concentrations of power in [proof-of-work] and [proof-of-stake] systems, and other problems in governance of crypto and DeFi, have already led to all-too familiar difficulties; top of the list are company failures, unlawful activities, and financial losses for investors.” If left unchecked, this situation would undermine investor confidence in crypto-based financial institutions and their consumers and might lead to broader financial turmoil.

Wilkins quoted research from April 2022 that revealed, in a sample of the 50 biggest proof-of-stake platforms by market value, the top ten validators owned between 47% and 100% of the stakes.

The adviser to the central bank stated that law and legislation pertaining to digital assets are still a work in progress, but he urged the private sector and DeFi investors to do more to ensure the security and governance of projects and digital assets.

Wilkins said, “The private sector has an incentive to be proactive.” “Major investors must “up and shine” to demand change. It is essential that the business sector implement best practises and standards of conduct to encourage a culture and behaviour based on trustworthiness.”

Wilkins cautioned that crypto miners may take advantage of their position in proof-of-work blockchains by deciding how to process transactions or manipulating the market via what is known as maximum extractable value. She also said that open-source DeFi systems like Polkadot and MakerDAO provide emergency decision-making capabilities for leadership teams.

Wilkins also observed that the established financial industry has started embracing blockchains, hence increasing the urgency of the need for enhancements from digital asset initiatives.

Also Read: Investors create a group to locate Terra founder Do Kwon