Reports said that Birgit Rodolphe, the Executive Director at Germany’s Federal Financial Supervisory Authority (BaFin), has called for innovative and uniform regulation of the decentralized finance (DeFi) space throughout the European Union.
It has been reported that BaFin is Germany’s financial regulatory body responsible for regulating banks, insurance firms, and financial institutions including cryptocurrency companies. BaFin is the issuer of “crypto custody licenses,” a permit required for firms wanting to offer cryptocurrency services within Germany.
However, in an article on BaFin’s website, Rodolphe warned of the risks to consumers of the unregulated DeFi space and called for standardized regulatory considerations across EU member countries.
“One thing is clear: the clock is ticking. The longer the DeFi market goes unregulated, the greater the risk for consumers, and all the greater is the danger that critical offers that have systemic relevance will establish themselves.”
The report said that she cited risks to consumers of “technical issues, hacks, and fraudulent activity” that have seen millions lost and claimed that DeFi isn’t as “democratic and altruistic” as its fans say and that DeFi products are “difficult for many to grasp.”
“Utopia? Or rather dystopia? Who do I contact if I want to defer my crypto loan? What happens if my crypto assets suddenly disappear altogether? In any case, there is no deposit protection fund for such cases.”
She added that lending, borrowing, insurance, and other products outside of the traditional financial system are subject to licensing and supervision where they’re offered, and called on regulators to set rules which will give DeFi providers legal clarity. Rodolphe highlighted BaFin’s “crypto custody business” license introduced in January 2020 as a regulatory regime that is “attractive” to crypto businesses.
Thus, Germany also made many moves related to crypto across its government in 2021, with law reforms to embrace blockchain and the tightening of regulations on crypto businesses. The country’s central bank took a leading role in testing a European central bank digital currency (CBDC).