An Advisory Committee Calls for Responsible Development of Decentralized Finance
An advisory committee for the Commodity Futures Trading Commission (CFTC) has voted to submit a report urging the government and industry to understand and promote the responsible development of decentralized finance (DeFi). This is considered the first substantial report on DeFi by a government advisory committee.
Recommendations for Policymakers
The report includes recommendations for policymakers, such as increasing knowledge about DeFi, enhancing enforcement effectiveness, and assessing existing regulatory frameworks. The goal is to identify areas where regulations need to be expanded to address risks associated with DeFi.
Ari Redbord, head of legal and government affairs for TRM Labs and vice chair of the CFTC’s Technology Advisory Committee, highlighted the importance of this report. He noted that while regulators have focused on centralized exchanges in the past, it’s crucial to understand DeFi’s unique characteristics.
Global Efforts to Regulate DeFi
Government officials worldwide are working on regulating DeFi. In December, the International Organization of Securities Commissions (IOSCO) issued nine recommendations covering disclosures and cross-border cooperation. In the US, lawmakers have been focusing on bills related to stablecoins but haven’t addressed DeFi extensively.
A First Step in Policymaking
Justin Slaughter, policy director at Paradigm and a CFTC technology advisory committee member, emphasized that this report is a significant milestone in policymaking on DeFi. Although the recommendations don’t have the force of law, they provide valuable insights into the opportunities and risks associated with DeFi.
Slaughter believes this report will serve as an initial roadmap for policymakers as they navigate the complexities of regulating DeFi.
Hot Take: Government Advisory Committee Calls for Responsible Development of DeFi
An advisory committee for the CFTC has taken a crucial step by submitting a report on decentralized finance (DeFi) to promote responsible and compliant development. This report, considered the most comprehensive review of DeFi by any US government agency, provides recommendations for policymakers, including the need to increase knowledge about DeFi and assess existing regulatory frameworks. It reflects the growing global efforts to regulate DeFi, with organizations like IOSCO issuing recommendations. While the report’s recommendations don’t have legal force, they mark an important milestone in policymaking on DeFi and offer a starting point for regulators navigating this rapidly evolving space.
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