With Regulated Decentralized Finance (reg-DeFi) becoming topic of discussion Within and outside the crypto space, the World Economic Forum (WEF) has published a policy toolkit on DeFi.
According to a release on Tuesday, the toolkit seeks to provide useful guidance regarding DeFi regulations for regulators and government policymakers.
The WEF reportedly partnered with the Blockchain and Digital Asset Project at the Wharton School of the University of Pennsylvania. DeFi entrepreneurs, legal experts and financial regulators also collaborated with WEF to develop the toolkit.
Financial regulators involved in developing the policy framework include representatives from agencies in the United States as well as those involved in preparing the plan for Europe. Market in Crypto Assets (MiCA) Regulations.
As part of the announcement, the WEF said that its toolkit provides a baseline for examining important factors related to DeFi regulations. Together national and intergovernmental bodies that want Formulating and implementing DeFi rulesSome stakeholders say that small startups may be disadvantaged in the emerging industry.
Indeed, the work of the European Commission on the MICA regulatory framework has drawn significant concerns from industry stakeholders. Back in March, the International Association for Trusted Blockchain Applications (INATBA) argued that some provisions of the proposed regulations would apply. Crypto Startups at a Loss Compared to legacy finance functionaries.
According to Sheila Warren, deputy head of the WEF’s Center for the Fourth Industrial Revolution, such concerns are captured in the toolkit. “It’s something that we spend a lot of time thinking about, both in terms of helping new companies drive innovation, but also what it means in terms of accessibility,” Warren told Cointelegraph.
“Part of DeFi’s promise is a more democratic route to connect financial services, whether lending, insurance, or other. The cost of compliance in some cases may mean that some participants are discouraged from entering the market. which prevents innovation and replicates the existing power gap in the existing system.
Warren also noted the need to balance decentralization and privacy concerns with the aim of combating illegal activities such as money laundering. According to Warren, regulation should not be seen as the end goal, but rather the adoption of incentive and reward mechanisms in decentralized network consensus to counter the activities of bad actors.
As already stated by Rune Christensen, co-founder of MakerDAO, Regulatory clarity needed for DeFi to interact with real-world assets. These regulations will likely cover investor protection and anti-money laundering concerns.
For Warren, consumer protection, taxation and AML efforts should not destroy decentralization, stating:
“I am passionate in my view that decentralization is critically important to the DeFi ecosystem – the most exciting opportunities in the DeFi ecosystem stem from this aspect, especially when it comes to governance.”
At the time of writing, data from DappRadar shows that the adjusted closing price in the DeFi market is higher. $67 billion. Once a niche market place on the Ethereum network, DeFi is taking over other chains including the Binance Smart Chain.