The Abu Dhabi Global Market (ADGM), the regulatory arm of the United Arab Emirates financial center, has released a discussion paper seeking stakeholder comments on the regulation of decentralized finance (defi). This paper also reveals the regulatory agency’s position on the anonymity of decentralized transactions.
Non-paper guidance for financial institutions
FSRA, the regulatory arm of the United Arab Emirates financial center ADGM, has published a discussion paper seeking public comment on decentralized finance (defi) policy reviews.
In this paper, FSRA will release the documentation as the decentralized space has increased significantly in terms of both the number of users and the value of such transactions.
According to the regulatory department, the discussion paper “uses as a starting point for dialogue on how Decentralized Finance will ultimately be regulated.” Nevertheless, the FSRA has made it clear that this paper is not “guidance” for financial institutions. Instead, this paper contains the regulatory’s views on the medium-term direction expected between the five and ten years.
In addition, the discussion paper contains the so-called “high-level policy position on how the FSRA considers Decentralized regulations” in the regulatory sector. This document also describes what the defi’s future regulatory framework will look like.
Defy regulation is inevitable
In a post-publishing statement, FSRA CEO Emmanuel Givanakis said:
DeFi is a new part of the global financial ecosystem that promises to provide more efficient and coordinated financial services. To realize this potential, you need to identify the risks posed by DeFi and take appropriate action. We are pleased to be able to work with our views on DeFi and industry practitioners to provide that potential future direction for ongoing discussions in the community.
Givanakis added that stakeholder contributions help regulators make informed policy choices, which help address the risks associated with decentralized finance.
Although the FSRA states that it will consider stakeholder contributions, regulatory agencies argue elsewhere in this document that decentralized finance is inevitable. Regulators also argued that “maintaining the anonymity of DeFi participants will become increasingly unacceptable in the medium term.”
Meanwhile, FSRA has set a deadline for submitting comments on June 30, 2022. After this period, FSRA will review the feedback and determine the next step.
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