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Decentralized finance (DeFi) in Europe: is there regulation or not?


The regulation of decentralized finance (DeFi) is something that is still underway, considering how recent this technology is. However, Europe is already preparing to welcome DeFi, which includes regulation, according to some experts at the European Blockchain Conference.

The panelists were Amadine Doat, legal director and head of public policy at Ledger; Dr. Nina-Luisa Siedler founding member of the German Blockchain Association and Joshua Klayman. Klayman is currently Head of Blockchain and Digital Assets at Linklaters LLP.

Finally, Belén Arribas also participated in this event. Arribas is an attorney with extensive experience in the field of data privacy law, and digital commerce, including cutting-edge sectors such as blockchain, cyber security of large data and more. She was a pioneer in this sector in Spain and has been recognized for it.

Europe and the regulation of decentralized finance (DeFi)

Decentralized finance (DeFi) has gained a lot of traction lately, to a level that looks almost like a bubble about to burst. However, this is not the first time that the cryptocurrency industry has seen something of this kind, nor the first time that it has debated whether or not it should be regulated.

According to Amadine Doat, this scenario is quite reminiscent of the one that came up with the Initial Coin Offerings (ICOs). Specifically, the expert said “DeFi makes me think about what happened with ICOs, as if it was a long time ago. It was only a year or two ago, but it seems like a lot longer”.

He then added that “If you talk about regulation, I think it will raise an interesting debate. One thing leaders hate is that you seem to have no one responsible. (…) You write a code, and then everyone can land on that protocol and make a profit through a smart contract”.

However, according to Doat, some European regulations will have an impact on the digital assets sector, but they have neglected DeFi. “I think this could be a smart move. I think too much regulation is going to kill the relationship sometime. We should once again have a risk-based approach”.

Additional comments

For her part, Arribas said she was very happy and said that everyone in Spain should be. This is because the Sandbox law was recently passed. “It has just been approved by Congress. We do not expect many changes in the law. I must say that it follows the English model (…) because the agreement is quite white. This is a transformation of the Spanish economy”.

, Decentralized finance (DeFi) in Europe: is there regulation or not?, Forex-News, Forex-News
Decentralized finance is a relevant topic in 2020 within the cryptocurrency industry. For this reason, the panelists analyzed the need or not for regulation around DeFi in Europe. Source: European Blockchain Conference

Likewise, Klayman argued that “This new wild thing we call DeFi collides with these old things we call laws. (…) I’m certainly not speaking on behalf of other jurisdictions or even on behalf of my own, it’s just that we have to look through this label and see what is being done”. With this, the American lawyer meant that you have to be certain with the DeFi, and see them beyond the immediate success they are having.

Decentralization at all levels

Siedler commented that he believes there is true decentralization at all levels. According to her, typically what we see is centralized service providers giving access to DeFi applications “because the normal user on the street is not able to use those things directly. They need an access provider”.

Also, the expert added that she does not believe that we should lose sight of the risks of DeFi only “because people are getting excited about the term and because there is a lot of money out there right now”. He said he is a fan of all this space, but also takes into account the limitations.

We have all had a vision about how this works, about what the laws are, and what are the loopholes in the existing ones”Siedler mentioned. However, he also highlighted that if we think of people from all over the world accessing DeFi as if it were their own bank, we would understand the reasons and interests of regulators in “protecting” them.

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