Open Financial System

Definition ∞ An open financial system is a global economic structure that allows free and permissionless access to financial services and capital flows. Characterized by decentralization and transparency, such a system minimizes intermediaries and operates on public, programmable infrastructure, often powered by blockchain technology. It aims to reduce barriers to entry, promote financial inclusion, and enable innovation by allowing anyone to build upon or interact with its protocols without requiring traditional gatekeeper approvals. This framework contrasts with conventional financial systems that are typically centralized and permissioned.
Context ∞ The concept of an open financial system is a central tenet of the decentralized finance (DeFi) movement, frequently discussed in crypto news as a potential future for global economics. Reports often highlight how blockchain technology facilitates borderless transactions, accessible lending, and novel financial products for underserved populations. Regulatory bodies are grappling with how to oversee such a system while preserving its innovative potential and addressing concerns about consumer protection and illicit activities.