DeFi Protocols And The Regulatory Worry That Surrounds Them

  • DeFi Protocols And The Regulatory Worry That Surrounds Them

    Decentralised finance, otherwise known as DeFi, has a big chance to attract further regulation attention according to a recent report by the global management consulting company BCG Platinion and The report also looks into yield farming as another sector which could see more attention from regulators.

    The joint research paper by the two companies as suggested at the quick growth of decentralised finance in 2020 has created a massive potential for money laundering and with this, it could bring it under the radar of monetary authorities and lawmakers.

    This kind of finance was developed in order to be decentralised and permissionless. This means that there is no know your customer (KYC) requirements for many of the consumer base which is very unlike centralised platforms. On top of this, it operates outside of government and the law of regulation and as a result of this, many concerns have been raised about the legal access to financial services.

    Ciphertrace has said the following was commenting on the report in its newsletter:

    “Since DeFi protocols are designed to be permissionless, anyone in any country is able to access them without any regulatory compliance. As a result, DeFi can easily become a haven for money launderers.”

    It seems that many protocols that fall under this category are doing their very best to escape the threat of regulation and move to a fully decentralised body which would include governance. With this and to that end, regulators would not be able to shut the platforms down even if they had an army…

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