The Bank of France examined decentralized finance (DeFi) and its potential regulation in the context of the European regulation of crypto assets. The authors note that existing regulations are inadequate to address the range of services, technologies, and associated risks that fall under the term “DeFi”. The paper suggests that certification could improve blockchain infrastructure security, decentralized autonomous organizations (DAOs) could be overseen by registration, and intermediary regulation could improve customer protection. However, the current regulation of crypto-asset markets (MiCA) excludes fully decentralized services, requiring a redefinition of “crypto-asset providers’ to extend regulation to DeFi intermediaries. This paper argues for minimum standards for blockchain code, smart contract code certification, and the regulation of decentralized oracles to prevent collusion. Stablecoin regulation is also necessary to regulate DeFi, but the MiCA framework does not apply to fully decentralized services without intermediaries, requiring additional rules for the use of stablcoins in DAOs. Despite being 45 pages long, the document is clear and detailed about the DeFi technology and related issues.
The French central bank considers certification and incorporation as components of its regulatory approach to DeFi.
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