Official asks to regulate DeFi without wasting time, Terra USD effect?

Official asks to regulate DeFi without wasting time, Terra USD effect?
Key facts:
  • For regulators, DeFi could cause systemic problems in the economy.

  • Officials express themselves on regulations, but give no indication that they want to ban DeFi.

The executive director of Settlement and Prevention of Money Laundering in Germany, Birgit Rodolphe is convinced that decentralized finance (DeFi) must have the relevant regulations.

The official does not make explicit reference to any recent case. In any case, it is striking that she adds her voice right now to that of other regulators in the world, who they pronounced on the subject after the recent price drop of cryptocurrencies terra (MOON) and terra USD (UST).

Rudolf wrote on the website of the Financial Authority of your country which, for her, DeFi is a “dystopia”. According to Dictionary of the Royal Spanish Academythis is a «fictitious representation of a future society with negative characteristics, causing human alienation».

For the official, DeFi platforms cannot provide the level of security of the fiat system. “Who can I contact if I want to defer my cryptocurrency loan? What happens if my cryptocurrencies suddenly disappear completely? », She wonders. She herself replies: “in all these cases, there is no deposit guarantee fund”.

For all these reasons, Rodolphe is convinced that DeFi, being direct competitors of the traditional financial system they must have a regulatory framework up to the current standards of already regulated markets.

Of course, the result of regulatory considerations cannot be that we relax established standards or make DeFi offerings better in terms of regulation than comparable offerings in the traditional financial market.

Birgit Rodolphe, German civil servant.

German official Birgit Rodolphe believes that DeFi must be regulated without wasting time. Source: BaFin.

For Rudolf, It is imperative that regulatory considerations be taken quickly. According to her, the longer the waiting time, the more DeFi will penetrate the market, which may represent that they have a “systemic relevance”. The CEO still sees DeFi as a niche market, but with the potential to compete against the financial market.

Old demands of regulators on cryptocurrencies

Rodolphe’s recommendations, while given temporarily within the context of the collapse of the Terra ecosystem, They also seem to meet old demands of regulators worldwide.

For example, as CriptoNoticias has reported, the Financial Action Task Force (FATF) has issued numerous recommendations indicating how the cryptocurrency ecosystem should be regulated. In the European Union, various organizations have set their sights on decentralized finance and especially about stable cryptocurrencies.

To all this, we must add the research being carried out to launch a digital euro in the near future. She is serious a cryptocurrency issued by central banks with characteristics that seek to prevent any illicit use of money.