Regulatory authorities aim at Defi with new global standards

global authorities have taken the first step to put decentralized financing under regulatory supervision after the rapid growth of the block chain -based alternative to the traditional financial system.

Standard seters for combating money laundering said on Thursday that creators, owners and operators of decentralized financial services should comply with the rules to combat money laundering and terrorist financing. The Financial Action Task Force (FATF) asked the national regulatory authorities to apply standards to persons who remain "control or sufficient influence" via defi apps, according to a report.

The guidance of the FATF, an intergovernmental facility based in Paris, is the first attempt at global authorities to tackle the rapidly growing world of decentralized finances, which according to data group Defi Pulse has put it on $ 100 billion this year.

crypto dealers sometimes give coins to defi systems against interest payments, a process known as "staking". The strategy can provide juicy returns, but investors are also exposed to serious risks, such as the loss of their entire capital.

But the move leaves the defi project operator scope because the position has no powers to enforce or monitor the new guidelines.

The FATF's proposals have been delayed repeatedly because the authorities have difficulty gaining an overview of the new industry, in which instead of board members and executives lead preprogrammed algorithm organizations. The new standards indicate that the authorities will try to act against the people behind these algorithms in order to exert an supervision.

The report states that some projects are more centralized than their marketing suggests and could be classified as so-called virtual asset service providers, which would bring them to the control of money laundering.

"It seems quite common for defi agreements to be described as decentralized if you actually encompass a person with control or sufficient influence, and the jurisdiction should apply the definition regardless of the self-description," says the report.

"The automation of a process that is designed to provide covered services for a company does not release the controlling party from its obligations," she added.

Analysts from Goldman Sachs described the Defi industry last week as "an experimental and unregulated alternative financial system" full of fraud and hacks.

“[IT] will be a challenge for political decision -makers who deal with consumer protection and other social goals,” says a separate report by the bank.

The Defi market was faced with hacks that use poorly tested software. On Wednesday, a hacker stole around $ 130 million from the Cream Finance loan service-the company was targeted for the third time this year. In August, a hacker took digital token worth $ 600 million from Poly Network-only to return them later. Deversifi incorrectly paid a fee of $ 24 million for a deposit of $ 100,000 after an error occurred in a little tested software code.

DAVID Carlisle, director of political and regulatory matters at the data company Elliptic, said that the FATF "pull the supervisory authorities all over the world".

"By incorporating virtual assets into the regulatory framework designed for mainstream financing, it recognizes that virtual assets are too great to ignore them," he said.

The report also asked the regulatory authorities to examine stable coins, digital assets that are bound to currencies such as the dollar, since many could also be referred to as providers of virtual assets and fall under the existing rules. Stablecoins have a "greater potential for a mass adoption" because they are freely interchangeable and liquid, which makes them more attractive for criminals, the report says.