⚠⚠ BREAKING NEWS: EUROPE WANTS TO BAN DECENTRALIZED DEFI ⚠⚠
Europe's DeFi industry faces potential upheaval as the European Commission mulls over new regulations, including possible bans on non-decentralized protocols.
Under the Markets in Crypto-Assets (MiCA) framework, the Commission must submit a report by Dec. 30, 2024, assessing the DeFi market and proposing specific regulations. The focus is on exploring the regulation of activities like crypto-asset lending and borrowing, which are integral to DeFi.
The proposed regulations have sparked concerns about the legal viability of some crypto projects. MakerDAO co-founder Rune Christensen warns that DeFi frontends, like decentralized exchanges, could face licensing requirements, potentially rendering them impossible to operate as we know them today.
Nathan Catania of XReg Consulting suggests that the extent of DeFi rules will hinge on regulators' interpretation of decentralization. Entities performing professional services within DeFi arrangements could fall under MiCA regulations, even if the systems appear decentralized.
Moreover, the Financial Action Task Force (FATF) proposes that individuals or entities exerting control over DeFi arrangements could be classified as Virtual Asset Service Providers (VASPs), regardless of decentralization claims.
As regulators navigate the complexities of DeFi, the industry has experienced explosive growth, with the total value locked (TVL) in DeFi protocols surging from $570 million in April 2020 to $96.7 billion today.
The challenge lies in distinguishing between purely technological arrangements and systems with controlling parties, as Catania points out. The outcome of regulatory deliberations will significantly shape the future of DeFi in Europe and beyond. 🚀
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