Defi projects full of hidden risks, warns the global regulatory authority
Defi projects full of hidden risks, warns the global regulatory authority
The global umbrella organization of the securities supervisory authorities has warned that decentralized financing harbors countless hidden conflicts and risks because the authorities begin to circle one of the fastest growing corners of the cryptocurrency markets.
Martin Moloney, General Secretary of the International Organization of Securities Supervisory Authorities (IOSCO), compared the current rise of decentralized finances or Defi with the DOTCOM bubble and said their explosive growth "stronger attention from the supervisory authorities".
iosco plans to publish a 43-page report on Defi on Thursday, in which more than a dozen "key risks" are listed on the market. Moloney said the group would collect feedback from market participants and consider to design guidelines for the regulation of Defi.
"Most defi protocols are based on centralization in one or more areas, and there are logs that have a hidden central authority and are only decentralized by name," wrote the board of IOSCO in the report that was checked by the Financial Times.
"What we see is that many conflicts of interest are created in this area, and many of them are not transparent," Moloney told the FT in an interview. "Many of the participants in this room claim to do one thing and actually do another thing, or actually do several things at the same time."
The IOSCO's comments fit into a growing choir of warnings about the growth of Defi, which is advertised by supporters to offer cheaper and more accessible financial services compared to traditional institutions. Defi generally refers to cryptocurrency -based software programs that offer financial services without the use of intermediaries such as banks.
The regulatory authorities have taken limited steps to contain the Defi market because they deal with the more comprehensive question of how the cryptocurrency ecosystem can be monitored. Many developers said that they cannot be held responsible for open source software programs as soon as they have been released for a community of users.
Moloney said that the financial and material interests between development teams and defi projects are "very contradictory in many cases". Development teams often play a role in the distribution of cryptocurrency stands that help control the projects while they give themselves great allocations.
"The main problems obviously revolve around conflicts of interest, and obviously they affect the main actors who continue to have centralized power and control in the sector," said Moloney. "If you are not ready to recognize your power and control, we have a problem."
Last June,iosco organized an event where representatives of large regulatory authorities and defi projects such as the decentralized stock exchange took part, reported the FT. The organization has also set up a defi working group, which is headed by the US Stock Exchange Supervisory Authority Securities and Exchange Commission.
According to the Defillama analysis website, cryptocurrency owners have also put more than 210 billion risk capital providers in development teams and cryptocurrency stuck issued by the projects.
In the report, IOSCO also warned of market manipulation risks that are "somewhat unique" for Defi, such as the front-running of trades on Ethereum by users who help to validate transactions in the digital main book.
"If there is enough front-running in a certain blockchain, this can lead to outdated transactions, incorrect consensus and a final loss of trust in the ability of the blockchain, to process transactions and to achieve the final of the billing," wrote the board.
Additional reporting by Stefania Palma
Source: Financial Times
Kommentare (0)