DeFi Regulation Needs More Than MiCA, EC Hears

The European Union’s (EU) Markets in Crypto Assets (MiCA) regulation isn’t broad enough to cover decentralized finance, a finance professor said during a presentation to the European Commission (EC) on Friday (Oct. 21).

Tarik Roukny said that decentralized finance (DeFi) represents “severe threats to consumers, producers and the economy at large,” according to a Coindesk report.

Noting that the EU’s MiCA will only create a legal basis for oversight of traditional entities, leaving DeFi largely untouched, Roukny suggested that a voluntary regulatory framework for decentralized organizations might be the way to go.

“You need to find incentives to make it attractive for protocol designers and protocol developers to enter a policy framework or to enter the sandbox you have in mind,” he said, per the report.

Roukny’s comments come at a time when regulators around the world are turning their attention to DeFi and the significant challenges decentralized organization and anonymous participation create for governance and oversight.

Speaking at the same event, Mattias Levin, deputy head of the EC team responsible for digital finance, said that Roukny’s contribution “is part of our ambition to understand DeFi further, to inform our thinking about how to address any concerns and potential public policy consequences.

“DeFi is rapidly emerging, albeit from a low base — but there’s a strong policy interest in understanding the phenomenon further, and to try to see what are the economics and the legal implications of it,” Levin said.

The Bank of England (BoE) has also been mulling the implications of decentralized finance.

Read on: BoE Official: ‘Serious Deficiencies’ in Crypto Governance

On Wednesday (Oct. 19), one BoE official observed that many of the protocols governing decentralized crypto projects fail to ensure accountability in the same way as their centralized equivalents.

Like Roukny, Carolyn Wilkins noted that the current legal framework is ill-equipped to deal with decentralized organizational forms. She suggested that important crypto infrastructure needs to be “owned and operated by identifiable legal entities.”

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