The Association for Financial Markets in Europe Urges Inclusion of DeFi in MiCA Regulatory Framework
The Association for Financial Markets in Europe (AFME) has issued a paper urging regulators not to exclude decentralized finance (DeFi) from the MiCA regulatory framework. The AFME believes that excluding DeFi could lead to regulatory arbitrage and weaken the application of emerging frameworks. They warn that this exclusion could pose risks to financial stability and have knock-on impacts. The AFME sees DeFi as an important innovation within the financial system and suggests that the EU develop a taxonomy to classify DeFi activities and assets. They also advocate for a risk-based approach to DeFi regulation.
Key points from the content:
– AFME urges regulators to avoid excluding DeFi from the MiCA regulatory framework.
– Exclusion of DeFi could lead to regulatory arbitrage and weaken emerging frameworks.
– Risks to financial stability and potential knock-on impacts are possible with the exclusion of DeFi.
– AFME sees DeFi as an outsourced innovation and research lab for the formal financial system.
– AFME recommends the development of a taxonomy and a comprehensive regulatory solution for DeFi.
Hot Take: Including DeFi in regulatory frameworks is crucial for financial stability and innovation
By urging the inclusion of DeFi in the MiCA regulatory framework, the AFME recognizes the potential risks of excluding this emerging paradigm. DeFi has the potential to revolutionize the financial system and drive innovation. However, it also presents unique challenges that need to be addressed through comprehensive regulation. By adopting a risk-based approach and developing a taxonomy for DeFi activities and assets, regulators can strike a balance between fostering innovation and ensuring financial stability. It is essential that regulators actively monitor and manage the overlap between DeFi and traditional finance to prevent unintended risks.
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