The respected founder and developer of the decentralized finance (DeFi) project Andre Cronje has resurfaced after a long hiatus to call for stricter regulation of the cryptocurrency sector amid the implosion of several companies this year..
The comments are similar to those of FTX CEO Sam Bankman-Fried (SBF), who last week also called for tougher regulations for the digital assets sector.including increased consumer protection, transparency and disclosure.
Nevertheless, SBF was met with strong rejection from the community, and many accused the CEO of trying to monopolize or censor the DeFi spaceamong other things.
In an Oct. 25 blog post titled “Crypto Winter 2022,” Cronje called for more regulation of the sector, noting that “the recent decline in the cryptocurrency market has shown the flaws in the system and the need for regulation to rein in irresponsible actors and protect consumers.”.
Cronje added that it had been a gloomy year for the cryptocurrency sector.; pointed to the collapse of the Terra ecosystem and various cryptocurrency companies — particularly cryptocurrency lenders — which has left consumers reeling:
“The resulting issues that appear to be most problematic are where users’ cryptocurrencies are locked in accounts managed by exchanges, or where the management of their funds is left to third parties.”
He went on to call for greater protection for consumers, especially when it comes to cryptocurrency exchanges and cryptocurrency investment service providers.and highlighted the complex case of users trying to recover their funds in the ongoing Celsius bankruptcy case.
“Remedies under the current regulatory regime are ineffective. Most investors waive their rights to their cryptocurrencies in the voluminous terms and conditions of crypto exchanges and many will (at best) be classified as unsecured creditors if these exchanges are liquidated,” he wrote.
Former DeFi developer details current solutions used in traditional finance that the crypto industry has yet to introduceincluding deposit insurance, prudential supervision and consumer remedies by “being able to turn to the relevant prudential authority, or at least use the general legislation as a framework”.
Regarding deposit insurance, Cronje highlighted the importance of central banks around the world adhering to mandatory insurance practices to ensure the protection of consumer funds..
Under such practices, it generally means that people have a viable and relatively direct route to get their funds back, unlike in the case of Celsius.
“The deposit insurance safety net is a resource available to consumers in traditional banking that is not available to depositors on crypto exchanges (such as Celsius),” he wrote..
Regarding prudential supervision, Cronje said that authorities in the sector could improve confidence in cryptocurrencies.as is the case with central banks supervising private banks on factors such as “capital, asset quality, sound management, earnings, liquidity, and risk sensitivity.”
Cronje is considered to be one of the most influential figures in the DeFi movement, due in part to the launch of Yearn.finance in 2020 and his work on several other DeFi protocols.. However, in March he announced that he would stop working in the sector altogether.
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