The World Economic Forum (WEF) has published a policy toolkit on decentralized finance (DeFi).
It has been reported that the toolkit seeks to provide useful guidance for regulators and government policy-makers concerning DeFi regulations.
However, 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 the WEF to develop the toolkit.
The report said that financial regulators involved in developing the policy framework include representatives from agencies in the United States as well as people involved in crafting Europe’s planned Markets in Crypto Assets (MiCA) regulations.
WEF stated that its toolkit offers a foundational basis for examining critical factors concerning DeFi regulations. With national and intergovernmental bodies seeking to craft and enforce DeFi regulations, some stakeholders say smaller startups in the emerging industry might become disenfranchised.
WEF publishes policy toolkit promoting nuanced DeFi regulations. https://t.co/trYcyouml8 — Cointelegraph (@Cointelegraph) June 8, 2021
Likewise, the European Commission’s work 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 put crypto startups at a disadvantage compared with legacy finance incumbents.
Sheila Warren, the Deputy Head of the WEF’s Centre for the Fourth Industrial Revolution, said that such concerns are captured in the toolkit.
She added:
“This is something we spend a lot of time thinking about, both with respect to supporting fledgling companies driving innovation but also with respect to what it means in terms of access. Part of the promise of DeFi is a more democratized path to engaging with financial services, whether lending, insurance, or other. The cost of compliance can in some cases mean that certain participants are discouraged from entering the market, which both stifles innovation and replicates the existing power differential in the current system.”
Warren also touched on the need to balance decentralization and privacy concerns on one hand with regulations aimed at combating illicit activities like money laundering on the other.
According to Warren, regulation should not be seen as an end goal, rather it should adopt the incentive-and-reward mechanism common in decentralized network consensus to combat the activities of bad actors.
Thus, Warren said:
“I am passionate in my view that decentralization is critically important to the DeFi ecosystem — the most exciting opportunities in the DeFi ecosystem are tied to this aspect, especially when it comes to governance.”
Source: Cointelegraph | Image: Medium