Good day everyone,
I hope you are all well and having an excellent day, welcome to CryptoGod-1’s blog on all things crypto. Today I will be writing about the recent global crypto regulations for DeFi, and how France's Markets Regulator has expressed its full support for globally coordinated and transparent regulation in decentralized finance.
French Market Watchdog
France's market watchdog, the Autorité des Marchés Financiers (AMF), has announced its full support for globally coordinated regulation when it comes to DeFi. They have announced the aim and goal is to create a safe and protected market for users, while also promoting the growth of this innovative sector.
The AMF released a statement on Monday the 19th of June 2023 regarding DeFi, where they outlined their initial perspectives on the topic. Within the paper, which can be found here, they aim to provide a definition for DeFi, while also highlighting its trends and with it offers to the overall ecosystem.
Other areas such as Decentralised Exchanges (DEX's), Automated Market Makers (AMM's) and Decentralised Autonomous Organisations (DAO's) are looked at in-depth, along with decentralized trading protocols and governance‐related mechanisms.
The views in the paper will seek to encourage discussions with ecosystem stakeholders, with the AMF's overall aim being to foster the emergence and development of a balanced regulatory framework for DeFi. The French Autorité de Contrôle Prudentiel et de Résolution (ACPR) has already taken proactive steps in this regards, having formulated and submitted specific proposals for the regulation of DeFi. Their aim is not just for its regulation in France, but for one on a global level.
“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.”
With the European Union (EU) seeing the much-anticipated Markets in Crypto‐Assets (MiCA) framework regulations entering into force, its next focus will likely be to address the DeFi space. They will look to further clarify guidance and recommendations for jurisdictions in terms of regulating DeFi, and according to the market regulator, DeFi will be facing a 2-in-1 key challenge:
- allowing for the development of transparent and safe means to help grow the ecosystem and encourage innovation,
- providing adequate levels of investor protection.
The AMF has stated that blockchain has provided an “innovative and disruptive mechanism” that has "challenged the technological infrastructure upon which the digital economy is built." However, they also feel that while DeFi’s novel approach to traditional financial services may provide new opportunities for technological innovation, it can also leads to multiple risks and challenges. Highlighting the Terra/LUNA crash in May 2022 as an example, the AMF feels a lack of clarity in operating such protocols is to blame.
They want an unambiguous framework which would require safeguards that would allow better information‐sharing and protect DeFi users. The regulator added:
“With DeFi still being at an early stage of development, yet evolving rapidly as a sector, legislation should be thought in a progressive and proportionate manner, taking into account on the one hand the benefits to innovation displayed by DeFi activities and governance models, while on the other considering the risks they pose to participants.”
The AMF said that the views expressed in the paper are not its official position and that it welcomes respondents’ opinions on them until the 30th of September 2023.
Have a great day.
Peace. CryptoGod-1.
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