As the regulated decentralized economy (reg-DeFi) has become a topic of debate both inside and outside the crypto space, the World Economic Forum (WEF) has published a policy tool on DeFi.
According to a post on Tuesday, the toolkit aims to provide regulators and government decision-makers with useful guidance on how to regulate DeFi.
WEF is said to have partnered with Blockchain and the Digital Asset Project at the Wharton School at the University of Pennsylvania. DeFi entrepreneurs, lawyers, and financial regulators also partnered with WEF to develop the toolkit.
The financial regulators involved in developing the policy framework include representatives from US agencies, as well as those involved in developing regulations for the European Markets for Crypto-Assets (MiCA).
As part of the announcement, the WEF stated that the toolkit provides a framework for examining critical factors that apply to DeFi rules. As national and intergovernmental bodies want to create and enforce DeFi rules, some stakeholders say that small start-ups in a nascent industry may be disadvantaged.
The European Commission’s work on the MiCA rules has in fact raised serious concerns among industry stakeholders. In March, the International Association for Trusted Blockchain Applications (INATBA) said that some provisions of the proposed rules would put crypto startups at a disadvantage compared to older CFOs.
According to Sheila Warren, deputy director of the Center for the Fourth Industrial Revolution at the World Economic Forum, such concerns are reflected in the toolkit. “This is something we have been thinking about for a long time, both in terms of supporting newcomers who are driving innovation and in terms of what it means in terms of access,” Warren told Cointelegraph, adding:
“The promise of DeFi is in part a more democratic way of interacting with financial services, whether lending, insurance or otherwise. The cost of compliance can in some cases mean that some participants are discouraged from entering the market, simultaneously discouraging innovation and reproducing differences in The strength of the current system.”
Warren also addressed the need to balance issues of decentralization and privacy, on the one hand, with regulations aimed at combating illegal activities such as money laundering, on the other. According to Warren, regulation should not be seen as an end goal, but rather as the introduction of a reward and reward mechanism common to a decentralized network consensus to combat malicious acts.
As MakerDAO co-founder Ron Christensen previously stated, regulatory clarity is essential for DeFi to interact with real assets. These rules will likely cover investor protection and anti-money laundering.
According to Warren, you should not undermine decentralized consumer protection, tax, and anti-money laundering by saying:
“I am excited about the fact that decentralization is critical to the DeFi ecosystem – this aspect is linked to the most exciting opportunities in the DeFi ecosystem, especially when it comes to governance.”
At the time of writing, data from DappRadar shows a total locked-down DeFi market value of more than $67 billion. DeFi has taken a market position in the Ethereum network, but is now beginning to actively use other networks, including the Binance Smart Chain.