France's premier financial market authority, the Autorité des Marchés Financiers (AMF), has voiced its support for internationally harmonized regulations governing decentralized finance (DeFi).
In a discussion paper, the AMF revealed its initial conclusions regarding the regulatory challenges posed by the decentralized and disintermediated features of the DeFi ecosystem.
AMF’s Attempt At Understanding DeFi’s Intricacies
The AMF’s paper delves into defining critical components of DeFi, such as decentralized autonomous organizations (DAOs) and smart contracts, which automate transactions.
Furthermore, the document highlights risks and raises questions about control mechanisms within the DeFi sector.
One of the key statements in the paper reads: "Due to the cross-border nature and reach of DeFi activities, the AMF also supports the development of a global coordinated approach towards regulation to ensure a global level-playing field, which should both aim to protect investors and foster innovation."
European Perspective On Emerging DeFi Challenges
Benoit de Juvigny, secretary general of the AMF, hinted during a meeting with journalists in May at this paper being instrumental in shaping the EU policies on DeFi.
He acknowledged the complexity involved in classifying participants in the DeFi space, in contrast to the more conventional financial systems.
AMF Embraces Global Standards, Encourages Stakeholder Participation
Global standard-setting bodies such as the Financial Stability Board (FSB) have also expressed interest in establishing benchmarks for the DeFi industry.
The International Organization of Securities Commissions (IOSCO) has a dedicated working group that is expected to release guidelines by year-end.
Affirming support for these global efforts, the AMF paper stated, "The AMF fully supports these initiatives, and intends to increase its engagement with stakeholders, both public and private, with a view to allow the emergence of a balanced regulatory framework that will help support the sound development of decentralized finance in the long run."
Navigating The Regulatory Labyrinth Of DeFi
Jurisdictions have been making progress in regulating centralized cryptocurrency exchanges, yet DeFi protocols pose a unique challenge for regulatory oversight due to the absence of a specific entity that can be held accountable for compliance.
The AMF has extended an invitation to industry stakeholders to provide their input on the proposed discussion topics until Sep. 30.
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