The Financial Services Regulator (FSRA), which regulates financial services operating within the Abu Dhabi Global Markets (ADGM), is said to help stakeholders better understand the potential opportunities and risks involved. A discussion paper (22 pages / 472KB PDF) has been published. DeFi protocol.
The DeFi protocol uses blockchain-based technology and smart contracts to record financial transactions and transfer funds. The system is designed to improve market efficiency by reducing reliance on traditional financial institutions such as banks and stock exchanges.
Tom Bicknell, a financial regulation expert at Pincent Masons, said: As the FSRA acknowledges, its benefits mean that DeFi’s popularity is growing rapidly, but continued lack of regulation can pose risks to investors, financial institutions, and the broader financial system. There is sex. “
A discussion paper aimed at initiating industry discussions on how to regulate DeFi provides the FSRA’s view of the medium-term direction of DeFi and what the future regulatory framework will look like. ..
According to the document, regulators may focus on transparency issues when deciding whether to recognize the DeFi protocol, such as controller performance, governance decisions, and the technologies that underpin the protocol. Future regulatory frameworks will not allow anonymous participants in the DeFi protocol.
FSRA also adds to customers engaged in DeFi activities, including explaining the risks associated with DeFi in clear and easy-to-understand terms and outlining how companies plan to use DeFi technology. May require you to provide disclosure of.
Regulators have booked an option to approve certain DeFi protocols. This is kept at a higher standard than the recognized protocol. In particular, FSRA said that at least one DeFi controller may need to be based on ADGM, or the DeFi protocol has a longer demonstrable track record. The FSRA said it may develop specific regulatory frameworks for future approval processes.
Emmanuel Givanakis, CEO of ADGMFSRA, said: We also hope that we can work with the industry to initiate dialogue to make informed policy choices to address these risks, thereby realizing the potential benefits of DeFi and future regulatory developments. looking forward to it. “
The deadline for comments on the discussion paper is June 30, 2022.