Amid the need to regulate the digital finance ecosystem and the drive to gather diverse opinions on it, the Abu Dhabi Global Market (ADGM), the regulatory agency of the UAE financial body, recently released a discussion paper.
The discussion paper aims to seek alternative opinions from stakeholders on the regulation of decentralized finance (DeFi). It also highlights the regulator’s position regarding the issue of anonymity in transactions in the DeFi space.
Paperwork is Not a Guideline for Financial Service Providers
The recently released discussion paper seeking public opinion on DeFi policies is geared toward establishing a holistic understanding of the central theme behind the move by the ADGM. The regulatory body acknowledges the DeFi infrastructure in terms of transaction volumes and the number of users it has gained.
According to the regulatory body, the discussion paper is intended to serve as a stepping stone on the way forward toward the regulation of DeFi, and the document is not to serve as a guide to financial service providers.
From all indications, the paper consists of the views of the regulatory body on the likely course of action to take, which may be on a medium-term basis spanning dive to ten years.
Considering the complexity of regulating DeFi, the discussion paper also added a high-level policy framework on how the Financial Service Regulatory Authority (FSRA) intends to control the activities of DeFi products and services. The same document gave a clue about the future of DeFi regulation and what it would look like in the years to come.
DeFi Regulation Has Come to Stay
According to the CEO of FSRA, Emmanuel Givanakis, the global financial ecosystem has evolved, and DeFi is a product of such evolution. DeFi promises to bring efficient and unique financial services to suit individuals’ and organizations’ peculiar needs.
However, achieving such goals comes with a risk of its own, and to achieve the set objectives, the risks associated with DeFi need to be identified and duly addressed.
As such, the body is pleased to contribute to the discourse on DeFi and the possible ways it can be improved. The future direction of the ecosystem in the ongoing discussion is to bring the community together alongside industry players to chart a new course forward.
According to Givanakis, the inputs from stakeholders will help the regulatory body make informed decisions as regards policies to implement, which will, in turn, help address the risks associated with decentralized finance.
Despite asserting that contributions from stakeholders are highly anticipated, the need to regulate the DeFi operation is inevitable, going by the risks involved. The regulatory body also added that anonymous transactions would no longer be tolerated as far as official policy is concerned.
Meanwhile, the deadline for stakeholders’ contributions to the proposed policy is June 30. The FSRA will then review the comments made and decide on the next course of action.
Regulations for digital finance have been the focus of most authorities worldwide.