This feature analyses decentralised finance (DeFi), a new form of crypto intermediation that uses automated protocols on blockchains and stablecoins to facilitate fund transfers. Even though links with traditional finance are currently contained, DeFi warrants closer monitoring because of high leverage, limited shock-absorbing capacity and built-in interconnectedness.
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<p><span>Non-bank financial intermediaries (NBFIs) have grown significantly. Their activities can amplify market stress and undermine financial stability.</span></p>
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<p><span>A macroprudential regulatory approach is needed to address the structural vulnerabilities in NBFIs, most notably liquidity mismatches and hidden leverage.</span></p>
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<p><span>Concerns about a new virus variant late in the period under review<a href="https://www.bis.org/press/p211206.htm# ftn1" name=" ftnref1" class="hashlink"><span class="firstword">1</span></a> curtailed investors risk appetite. Financial conditions tightened in several emerging market economies where inflationary pressures persisted.</span></p>
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