Global Crypto Regulations for DeFi Backed by France’s Markets Regulator

France’s market watchdog, the Autorité des Marchés Financiers (AMF), has said that it fully backs global crypto regulations for DeFi.

The goal is to keep users safe and help this new and exciting industry grow.

On Monday, the AMF put out a paper about DeFi that explained its first thoughts on the topic. The goal of the study is to define DeFi, point out trends that have been seen, and give an overview of the ecosystem.

It looked more closely at things like decentralized trading protocols and tools for governance.

Global Crypto Regulations for DeFi

The paper also wants to bring up ideas for discussion that could be helpful in a regulatory setting.

In the paper, the AMF tries to get ecosystem stakeholders to talk about its ideas. The goal is to help create and develop a balanced regulatory framework that “will help support the sound development of decentralized finance over time.”

The French Autorité de Contrôle Prudentiel et de Résolution (ACPR) has been proactive by making and submitting specific suggestions for the regulation of DeFi.

And it’s not just on a national level; the AMF also said:

“Because DeFi activities happen across borders and affect a lot of people, the AMF also supports the development of a global coordinated approach to regulation to ensure a level playing field around the world. This should both protect investors and encourage new ideas.”

Crypto-Assets (MiCA)

Soon, the much-anticipated Markets in Crypto-Assets (MiCA) rule will go into effect at the EU level. The European Commission will have to look at how DeFi is changing and decide if the sector needs to be regulated.

Also, the work of foreign groups like IOSCO49 and the FSB50 will make it clearer for governments what they should do to regulate DeFi and how they should do it.

Despite all of this, the markets regulator said that the next few years could be “a crucial period” for the DeFi sector, which is facing two major problems at once:

Letting people come up with safe and open ways to help the ecosystem grow and support innovation and give investors enough protection.
DeFi is used to having things go wrong.

The AMF said that blockchain is an “innovative and disruptive mechanism” that has “challenged the technological infrastructures upon which the digital economy is built.”

decentralized finance

Building on Bitcoin, DeFi is “no stranger to such disruption,” the report said.

But it warned that DeFi’s new way of doing traditional financial services could lead to risks and challenges as well as possibilities for new technology.

The crash of the Terra/LUNA protocol in May 2022 was a clear sign of this, the AMF said.

Terra’s dramatic fall also showed that there wasn’t enough clarity on how these processes were run, making it even more important to have a clear framework.

This framework would need to have protections that make it easier to share information and keep DeFi users safe. This would help people trust the environment and the new ideas it brings.

The government agency said,

“Since DeFi is still in its early stages but is growing quickly as a sector, legislation should be thought of in a progressive and proportional way, taking into account both the benefits that DeFi activities and governance models bring to innovation and the risks that they pose to participants.”

The AMF said that the ideas in the paper do not represent its official stance and that it wants to hear what people think about them until September 30.

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