Global Securities Body Report for DeFi: Analyst Not a Death Sentence
A series of privacy-damaging policy recommendations from the International Organization of Securities Commissions (IOSCO) should not be seen as the death knell of decentralized finance, argues Apollo Crypto analyst Matthew Harcourt.
In a report released on December 19, IOSCO wrote that DeFi posed particular challenges for regulators due to its often anonymous and decentralized nature, and made nine recommendations for regulating the sector, including exposing “responsible persons” and administering rules similar to traditional finance. Markets.
The report prompted some to sound warnings about the future of DeFi, such as Trading Protocol founder Mikko Otama, who described the document as “the ultimate report on how to kill #DeFi.”
IOSCO's final report on how to kill #DeFi
IOSCO is the International Club of Securities Regulators. They are a DeFi working paper prepared by the SEC.
As expected, IOSCO's recommendation is to fully contain DeFi and ensure that securities regulators are accountable for DeFi. This… pic.twitter.com/y7gFM0SjFU
— Mikko Ohtama (@moo9000) December 20, 2023
However, Harcourt told Cointelegraph that policy recommendations are deadly for DeFi, at least not for established protocols.
“I think it's important to emphasize in their executive summary that IOSCO says ‘DeFi is an important, evolving and expanding technological innovation', I don't think this is all doom and gloom as some media is portraying it,” he said. .
Apollo Crypto is a Melbourne-based investment fund that holds significant exposure to DeFi projects.
IOSCO – its 130 members, responsible for regulating 95% of the global securities market, urged policymakers to start identifying “responsible people” and to maintain existing regulations for traditional financial services.
“These proposed regulations will have the greatest impact on early-stage innovation in DeFi due to the stricter requirements for becoming an established business,” Harcourt said.
In its comments, IOSCO considers those responsible as any person with control or “substantial influence” over the final product or service.
“Given the similar economic functions and activities of DeFi and traditional financial markets, many existing international policies, standards and jurisdictional regulatory frameworks apply to those DeFi activities and the mechanisms that regulate them.”
In addition, IOSCO states that decentralized autonomous organizations must be governed in the same manner as any other financial services organization that chooses to incorporate.
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“Persons and entities that offer or offer financial products and services and engage in financial activities, regardless of their identities, organizational forms or technologies, must be subject to applicable laws,” the report reads.
Harcourt concluded that while the recommendations are not good from a privacy perspective and are probably aimed at early stage protocols, they should not be seen as a direct attack on DeFi.
Given the strong fundamental benefits of on-chain financial applications, I don't think these proposed rules pose any existential risk to decentralized finance.
In the year November 17. IOSCO released its recommendations for regulating the broader crypto market – similar to its position on DeFi – recommending that digital asset markets be regulated in a manner consistent with existing rules for much of traditional finance.
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