At the session at the Point Zero Forum, SBI Digital Asset Holdings (SBI DAH), the leader of JP Morgan’s onyx blockchain division, and Metaco, a custody company that previously announced a digital asset custody agreement with Citi, will make DeFi safer. We talked about how to do it. today. Two of the speakers proposed self-regulation in addition to the inevitable regulations.
DeFi: Lack of learning experience or regulation?
The failure of Terrace Table Coin and its associated Luna Token lost $ 44 billion in a week and was a big part of the debate. As an entrepreneur, Metaco CEO Adrien Trekkani argued that one failure should not lead to the rejection of technology. Failure is a normal part of innovation.
SBI’s Fernando Luis Basqueskao objected. He observed that moving fast and breaking things was probably acceptable to Web1 or Web2, but not to financial services, where the cost of failure was much higher. There should be no shortcuts. Mentioning one of the failures of the dot-com era, he states: But if you’re building a multi-billion dollar platform with AUM (Assets Under Management), your stakes will be much higher. He concludes that the focus should be on properly regulating services rather than technology.
Umar Farooq, JPM’s Onyx CEO, also agreed. “Wealth of tens of billions of people has been lost. People in retail stores. And banks have lost $ 10 billion in retail customers (money),” I’m sorry we’re moving really fast. If you say, management will be lynched on the street, “Farooq said. Trekkani chimed in that there were many losses from centralized finances.
Farooq considered DeFi’s recent problems unable to be learned from history and previous financial crises, especially the degree of leverage and the ultimate rewind.
“For some reason, crypto assets were unregulated and escaped murder,” said Diana Paredes, CEO of regtech startup Suade Labs. One of the issues that Paredes emphasized was the degree of interconnection within the crypto sector and the extreme price correlation between assets. However, Metaco’s Treccani pointed out that there is a high correlation between tech stock prices.
Potential self-regulatory solution?
Next, each panelist had different views and discussed what to do about the risks of DeFi. The point of the discussion was whether anyone could keep uploading smart contracts, or whether a gatekeeper was needed.
Treccani of Metaco said that the essence of a startup is pushing the boundaries, and if Uber first asked for permission, it wouldn’t exist today. He resolutely insists on the need to keep everyone free to upload smart contracts, and if he deploys the necessary regulatory approvals or licenses for smarts, “I think it will be a disaster. It will seriously undermine innovation. Probably. ”There is no discussion of the utility of blocking the deployment of smart contracts on the public blockchain.
Metaco CEO is interested in having an objective third-party auditor, not a regulatory agency. These auditors review smart contracts not only for code security, but also for potential financial implications. In the case of Terra, he believed that the collapse was predictable, so I was surprised that people weren’t shouting “You shouldn’t touch it” in the market. That said, some people signaled a warning long ago, but most didn’t pay attention.
Treccani mentioned the potential role of the auditor, but confirmed that major rating agencies, such as Fitch and the S & P Global Ratings building team, are involved in this sector.
The second aspect is unavoidable regulation. Treccani said it is important for any law to promote innovation without creating as many risks as it does today.
SBI’s Vazquez Cao had a subtle perspective built up through his experience in the early open source movement. He believes that self-governance is an important requirement and points out that governance is narrow in today’s DeFi. Only token holders win votes and regulators do not have seats. He argues that DeFi governance needs to be multiple stakeholders.
Like Treccani, he also suggested auditing smart contracts. However, he has positioned these auditors as gatekeepers or trust anchors who may scrutinize smart contracts. It may also be given a role, such as JP Morgan, to keep the process lighter than regulatory reviews.
From an open source perspective, IBM “open source became mainstream when it invested millions of dollars,” Vazquez Cao said. “Similar things are happening with DeFi. If these trust anchors and gatekeepers can identify what to do, this will explode. It will be a game changer in the industry.”