It was a matter of time until regulators began paying closer attention to decentralized finance. Ioco, an international securities regulator, has set up a task force to achieve this goal. Analyzing risk and opportunity is essential and may warrant further regulatory measures.
Iosco Sets its Sight On DeFi
Ongoing growth has made decentralized finance a prime target for regulators. Hundreds of billions of dollars go around in this unregulated industry, which poses any opportunities and carries risks. Iosco wants to address the industry and determine whether regulation may prove necessary. Doing so will be challenging as the industry is built on peer-to-peer technology.
A report issued by the regulator highlights the fast-growing nature of DeFi and key areas of concern. As most services and products in DeFi replicate traditional services and activities, they can offer much more lucrative returns. However, these products and not regulated and pose an increased risk to investors, per Iosco. There are also concerns over DeFi fraud and theft, issues that remain synonymous with the broader cryptocurrency vertical.
MAS Assistant Managing Director Tuang Lee Lim states:
“Iosco’s decision to establish the task force signifies our members’ resolve to take timely and coordinated policy action to appropriately address the risks arising from this fast-growing area. I look forward to working closely with experts and colleagues on the task force in charting its work ahead.”
For now, there is no plan to introduce any extra regulation. Iosco aims to collect public feedback, including crypto industry participants and DeFi developers. It will be interesting to see who responds to this call and how things will progress. Crypto-related regulation is a notoriously slow machine, and tackling innovative concepts like decentralized access to financial products and services may be a bridge too far as far as existing policies go.