Polygon Labs Proposes Critical Infrastructure Status for DeFi Protocols

By Amirkha9|

The evolving regulatory landscape has thrust decentralized finance (DeFi) into the spotlight, prompting protocols and entities like Polygon to actively seek regulatory clarity. Navigating this complex terrain is crucial for establishing a robust foundation in the rapidly changing DeFi sector.Polygon Labs Proposes Critical Infrastructure Status for DeFi Protocols

Polygon, through a collaborative effort between Chief Legal Officer (CLO) Rebecca Rettig and Michael Mosier from Arktouros, introduces a groundbreaking proposal in their recent research paper. The paper delves into the classification of "genuinely decentralized" DeFi protocols as critical infrastructure, addressing the unique risks associated with illicit finance in the decentralized financial sector.

To combat these risks, the proposed framework establishes three pivotal components. Firstly, it defines "independent control" to distinguish authentic DeFi protocols from those with centralized intermediaries falsely claiming the "DeFi" label. This differentiation is crucial in maintaining the integrity of the sector.

The second component involves classifying these identified DeFi protocols as "critical infrastructure," subjecting them to oversight and security coordination by the Office of Cybersecurity and Critical Infrastructure Protection (OCCIP), a branch of the US Treasury Department. Despite lacking regulatory authority over financial institutions, OCCIP's purported expertise in managing critical infrastructure is deemed valuable for ensuring the secure operation of DeFi systems, as emphasized by Rebecca Rettig, Polygon's representative.

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