The World Economic Forum publishes a number of policy instruments to regulate DeFi

As regulated decentralized finance (reg-DeFi) becomes a topic of discussion inside and outside the crypto space, the World Economic Forum has released a political toolkit on DeFi.

According to a statement released on Tuesday The toolkit is designed to provide regulators and government policymakers with useful guidance on DeFi regulations.

FEM reportedly partnered with the Blockchain and Digital Asset Project at the Wharton School of the University of Pennsylvania. DeFi entrepreneurs, legal professionals, and financial regulators also worked with the WEF to develop the toolkit.

The World Economic Forum publishes a number of policy instruments to regulate DeFi
The World Economic Forum publishes a number of policy instruments to regulate DeFi

Financial regulators involved in developing the policy framework include representatives from government agencies in the United States, as well as individuals involved in drafting the proposed European Regulations for the Crypto Assets Markets (MiCA).

As part of the announcement, FEM stated that its toolkit provides a fundamental foundation for studying the critical factors related to the DeFi regulations.With national and intergovernmental bodies who want to develop and enforce DeFi regulations, Some stakeholders say that smaller startups in emerging industries could be disenfranchised.

Indeed, the European Commission’s work on the MiCA legal framework has raised significant concerns among industry stakeholders.In March, the International Trusted Blockchain Applications Association (INATBA) argued that some provisions of the proposed regulations would put new crypto businesses at a disadvantage versus traditional financial traders.

According to Sheila Warren, Deputy Director of the WEF’s Center for the Fourth Industrial Revolution, these concerns are reflected in the toolkit. “We think about it a lot, both in terms of supporting startups and in terms of access.”Warren told Cointelegraph, adding:

Part of DeFi’s promise is a democratized way of engaging in financial services, be it credit, insurance or otherwise. In some cases, the cost of compliance can mean that certain participants are not encouraged to enter the market, stifling innovation and reproducing the performance differential present in the current system “.

Warren also addressed the need to combine decentralization and privacy concerns with regulations to combat illegal activities such as money laundering.According to Warren, regulation should not be seen as an end goal, but rather as the adoption of the incentive and reward mechanism common to the consensus of decentralized networks to combat the activities of bad actors.

As the MakerDAO co-founder said, Rune Christensen,  In order for DeFi to interact with real-world assets, clear regulation is required. These regulations are likely to address investor protection and money laundering concerns.

For Warren, Consumer, tax and AML efforts should not undermine decentralization, says:

“I’m thrilled with the idea that decentralization is critical to the DeFi ecosystem: the most exciting opportunities in the DeFi ecosystem are related to this aspect, especially when it comes to governance.”

At the time of this writing Data from DappRadar shows that the total adjusted value of the DeFi market is over $ 67 billion.DeFi, once a niche market on the Ethereum network, is making a splash with other chains, including Binance Smart Chain.

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