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## The People’s Bank of China Addresses Cryptocurrency Regulation and DeFi in Financial Stability Report

The People’s Bank of China (PBoC) has recently issued a financial stability report in which it highlights the need for global cooperation in establishing regulations for cryptocurrency and decentralized finance (DeFi) industries. The report emphasizes the importance of joint efforts by different countries to regulate the cryptocurrency market, which currently accounts for 1% of the global financial system.

The PBoC’s financial stability report includes a dedicated section on cryptocurrency assets for the first time, signaling a growing focus on this emerging industry. The central bank urges governments worldwide to adopt the approach of “same business, same risks, same supervision” to prevent regulatory arbitrage in the cryptocurrency market.

Furthermore, the report identifies potential risks associated with regulatory arbitrage, such as vulnerability to hacker attacks, market manipulation, and concerns related to DeFi governance mechanisms. The PBoC specifically references incidents like the Terra ecosystem collapse and the fall of FTX exchange, emphasizing the need to address regulatory fragmentation and eliminate supervision arbitrage.

In a significant policy shift, China is now calling for global collaboration to regulate the cryptocurrency industry, following its earlier ban on crypto activities within mainland China. Despite the ban, mainland China has remained a major hub for cryptocurrency mining, prompting speculation about the future of crypto regulation in the region.

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The AI legalese decoder can also help in identifying potential legal risks and compliance requirements associated with cryptocurrency activities, enabling stakeholders to make informed decisions and mitigate regulatory challenges. Its ability to process and interpret a vast amount of legal and financial data can provide valuable insights into the global regulatory trends shaping the cryptocurrency industry, empowering businesses to adapt and thrive in this rapidly changing environment.

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