World Economic Forum publishes policy papers for DeFi regulation

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The World Economic Forum has published a policy toolkit for decentralized finance, in a bid to help shape regulation of digital asset marketplaces between different countries.

The WEF policy toolkit coincides with growing interest in regulated decentralized finance worldwide, and presents guidance for regulators to help formulate effective legislative responses.

The toolkit has been developed with support from the Blockchain and Digital Asset Project at the Wharton School of the University of Pennsylvania, as well as entrepreneurs, regulators and legal professionals connected to the industry.

Regulators contributing to the policy document include representatives from the United States, and from lawmakers involved in creating the new European Markets in Crypto Assets (MiCA) rules.

Sheila Warren, the deputy head of the WEF Centre for the Fourth Industrial Revolution, said the toolkit provided for rules that would ensure DeFi firms were not disadvantaged compared to incumbent firms in the sector.

“This is something we spend a lot of time thinking about, both with respect to supporting fledgling companies driving innovation but also with respect to what it means in terms of access.”

“Part of the promise of DeFi is a more democratized path to engaging with financial services, whether lending, insurance, or other. The cost of compliance can in some cases mean that certain participants are discouraged from entering the market, which both stifles innovation and replicates the existing power differential in the current system.”

In particular, Warren said that decentralization was crucial to the success of the DeFi ecosystem, especially in delivering effective governance for the fledgling sector.

“I am passionate in my view that decentralization is critically important to the DeFi ecosystem — the most exciting opportunities in the DeFi ecosystem are tied to this aspect, especially when it comes to governance.”

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