Decentralized finance “may prove difficult to subject to regulatory requirements,” a regulatory adviser says.
The European
Commission’s newly proposed cryptocurrency regulations pose a specific
risk for the decentralized finance (DeFi) industry, according to
industry regulatory adviser XReg Consulting.
Adopted by
the European Commission on Sept. 24, the proposed Markets in
Crypto-Assets (MiCA) regulations aim to strengthen consumer and investor
protection in the crypto industry by laying out a series of obligations
on crypto asset issuers.
The regulations stipulate that crypto
asset issuers must be incorporated as a legal entity in order to operate
crypto services in the European Union. This particular requirement,
however, could represent a significant challenge for DeFi projects
because DeFi tokens’ issuers are “at times unidentifiable,” XReg
outlined in an Oct. 5 report.
The
obligation that crypto-asset issuers must be incorporated in the form
of a legal entity could pose significant challenges for DeFi projects
where issuance is decentralized and there is no identifiable issuer.”
XReg
noted that MiCA may generally promote consumer and investor protection,
market integrity and financial stability. However, the DeFi industry
may eventually see “significant and irreconcilable regulatory challenges
and possible existential questions, at least in Europe,” XReg wrote.
The
report stated that it remains to be seen how MiCA will coexist with
innovative decentralized projects, which “may prove difficult to subject
to regulatory requirements.”
XReg Consulting are not alone in noting concerns over MiCa’s potential negative impact on the DeFi industry.
The
International Association for Trusted Blockchain Applications (INATBA),
a consortium of major global crypto companies like Ripple, ConsenSys
and Iota, has also raised concerns. In an official response to MiCA’s publication,
INATBA warned that, under the proposed regulation, some early-stage
markets like DeFi “would likely no longer be accessible to Europe and
her citizens.”
While the European Commission has given MiCA its
stamp of approval, the proposed regulations must go through additional
regulatory review within the European Union, a process that could take
over a year.
source link : https://cointelegraph.com/news/report-europe-s-new-crypto-regulations-pose-existential-questions-for-defi
