If you are using Defi, you probably cannot avoid regulations. There are many Defi projects. However, many platforms require an on-boarding process similar to Cefi.
Most frequently used regulations
KYC and AML are the most two common regulations.
What is KYC?
Know Your Customer requires service providers to make an effort to verify the identity of customers.
What is AML?
Anti-money Laundering requires service providers to know where the source of money comes from.
Less common requirements
Depends on the investment risks, service providers may want to clarify customers’ income information or proof of accredited investors in order to take more risks on their products.
Cefi onboarding process
When you open a bank account in any financial institution, they will be required to verify the user through photo identification issued by the government, user address, identification number, birthday, or any other unique identification combination. They will also ask your source of income,
Defi runs on Cefi Exchange
Most of Defi products are on the Cefi marketplace. Exchanges like Binance will require KYC and AML for users to deposit and trade.
Cefi invests in Defi
Institutional investors can also invest Defi since the processes are similar to Cefi. Therefore, possible institutional investors will invest more in the future.
Likely all Defi will run on top of Cefi Exchange
Defi runs on Cefi Exchange will be the norm and regulators will require exchanges to comply with regulations.
In conclusion
Pure Defi may not exist and a combination of Cefi and Defi will continue evolving into the new financial services.
Photo by Matheus Viana on Unsplash
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Disclosure: The article was written by a delusional author who is possibly a nut job without any questions whatsoever about expertise in the subject matters. You should not believe any words this author wrote or you may experience similar symptoms or even possibly become a nut job.