On October 12, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), a constituent of the French Central Bank, released a summarization of its public consultation regarding a regulatory framework for decentralized finance (DeFi).
Spanning two months, from April to May 2023, the public consultation took place in response to a preliminary document that explored potential regulations for DeFi within the nation. Insights from external contributors led the ACPR to some unexpected findings, particularly concerning the enduring presence of centralization tendencies:
“The ACPR, therefore, concludes that the term ‘disintermediated’ finance more accurately describes the situation than ‘decentralized’ finance.”
The “paradoxically high degree of concentration” in DeFi, notably in the physical infrastructure that hosts blockchain nodes, wherein cloud service providers have a pivotal role, carries operational risk. The summary notes that a “substantial majority” of respondents favor the continued development of DeFi on public blockchains over private or permissioned variants. Nevertheless, they concede that regular audits of these blockchains are necessary. There was also widespread agreement on proposals to regulate intermediaries and certify smart contracts.
To sum up, the ACPR deems it “prudent” to formulate rules for smart contract certification, establish governance to safeguard DeFi users, and implement measures to uphold the blockchain infrastructures underpinning DeFi.
On October 11, the European Securities and Markets Authority (ESMA) also entered the DeFi dialogue. Through a report spanning 22 pages, the ESMA acknowledged the prospective advantages of DeFi, such as improved financial inclusion, the emergence of innovative financial products, and enhancements to the speed, security, and cost-efficiency of financial transactions, while also drawing attention to its “considerable risks.”
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