The US commodities regulator received a crash course in decentralized finance (DeFi) on March 22. Cryptocurrency industry executives briefed the regulator on key issues affecting the industry, such as exploits, decentralization, and digital identities.
As part of the first scheduled CFTC Technology Advisory Committee (TAC) meeting in Washington DC, members of the cryptocurrency space made filings with the regulator intended to cover critical issues currently affecting DeFi.
CFTC Commissioner Christy Goldsmith Romero opened the meeting with some prepared remarks, saying that “understanding how DeFi works” is “important” as “DeFi-related policy decisions” are currently being made by regulators and legislators.
Fantastic day sponsoring the CFTC Technology Advisory Committee. Expert presentations on #DecentralizedFinance #CyberResilience #Cloud and #ArtificialIntelligence. Great thanks to Committee Chair Carol House, Vice Chair @ARedbord and all of the TAC members and presenters. pic.twitter.com/kByy2aDPq4
— Commissioner Christy Goldsmith Romero (@CFTCcgr) March 23, 2023
Fantastic day sponsoring the CFTC Technology Advisory Committee. Presentations by experts in decentralized finance, #CyberResilience #Cloud and #ArtificialIntelligence. Many thanks to Committee Chair Carol House, Vice Chair @ARedbord and all TAC members and presenters. pic.twitter.com/kByy2aDPq4
The panel began with an explanation on DeFi and blockchain technology by Ari Redbordhead of legal and government affairs at blockchain intelligence company TRM Labs.
He exposed the advantages attributed to blockchains, namely transparency, immutability and privacysaying it could allow regulators to balance the “right to privacy with the need for security.”
Redbord and Nikos Andrikogiannopoulos, founder of the analysis company Metrika, jointly presented the advantages and problems that decentralization currently facesconcluding that the benefits “far outweigh” the problems, which they believe “will take care of themselves.”
Excited to join@CFTCTAC meeting sponsored by@CFTCcgrChristy Goldsmith Romero, Chair Carole House and Vice Chair Ari Redbord@trmlabs pic.twitter.com/QCXmpQ4cci
— Kristin N. Johnson (@CFTCjohnson) March 22, 2023
We are excited to join the @CFTC TAC meeting sponsored by @CFTCcgr Christy Goldsmith Romero, Chair Carole House and Vice Chair Ari Redbord @trmlabs pic.twitter.com/QCXmpQ4cci
“We have reached a point where we can no longer ignore decentralization,” Andrikogiannopoulos said.. “Not only do we have to embrace it, but I think it’s our duty to lead it in the right direction.”
Redbord highlighted the total value that entered DeFi in the past two years, stating that it was “stress tested during the FTX debacle.” […] and it did not fail. DeFi is here to stay.”
The total value locked in DeFi is around $49.1 billionaccording to DefiLlama, compared to 15,000 million at the beginning of January 2021.
Next, Carole House, resident executive at venture capital firm Terranet Ventures, and Jill Gunter, director of strategy at blockchain infrastructure firm Espresso Systems, provided an overview of current solutions for digital identity and non-custodial wallets.using the examples of the Ethereum name service and the MetaMask wallet.
Michael Shaulov and Dan Guido, founders of Trail of Bits, then presented the exploits and vulnerabilities that have had and continue to take place in the market..
“All hacks are extraordinarily public and are usually discovered by users and other outside companies before you do,” Guido said.who claimed that this instills a “need for perfection” in cryptocurrency companies.
Throughout 2022, the top 10 cryptocurrency exploits caused losses of more than USD 2 billionand DeFi was the recipient of 113 of the 167 that took place throughout the year.
Next, Shaulov briefly explained the exploits carried out against Ronin Bridge, BadgerDAO and the recent Euler Finance exploit..
The DeFi portion of the meeting concluded with a unanimous vote by members in favor of creating a Subcommittee on Digital Assets and Blockchain Technology..
The subcommittee will focus on the “why of DeFi”, what problems it solves, use cases, vulnerabilities, and proposed legal and policy frameworks.
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