Library Header Image
LSE Research Online LSE Library Services

Cryptocurrencies and decentralized finance (DeFi)

Makarov, Igor and Schoar, Antoinette (2022) Cryptocurrencies and decentralized finance (DeFi). Brookings Papers on Economic Activity, 2022-S. pp. 141-215. ISSN 0007-2303

Full text not available from this repository.

Identification Number: 10.1353/eca.2022.0014


The paper provides an overview of cryptocurrencies and decentralized finance (DeFi). The discussion lays out potential benefits and challenges of the new system and presents a comparison to the traditional system of financial intermediation. Our analysis highlights that while the DeFi architecture might have the potential to reduce transaction costs, similar to the traditional financial system, there are several layers where rents can accumulate due to endogenous constraints to competition. We show that the permissionless and pseudonymous design of DeFi generates challenges for enforcing tax compliance and anti–money laundering laws and preventing financial malfeasance. We highlight ways to regulate the DeFi system which would preserve a majority of benefits of the underlying blockchain architecture but support accountability and regulatory compliance.

Item Type: Article
Official URL:
Additional Information: © 2022 The Brookings Institution.
Divisions: Finance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited: 05 Jan 2023 10:24
Last Modified: 25 Nov 2023 21:33

Actions (login required)

View Item View Item