French regulator concluded its consultation on the regulation of DeFi
On October 12, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), a division of the French Central Bank, released a summary of its public consultation regarding the regulatory framework for decentralized finance (DeFi).
This public consultation spanned two months, from April to May 2023, and was initiated in response to an initial discussion paper outlining potential regulations for DeFi in France. External contributions to the consultation led to some unexpected revelations, particularly concerning the enduring presence of centralization patterns in DeFi. Consequently, the ACPR believes that the term “disintermediated” finance is more fitting than “decentralized” finance, acknowledging the structural persistence of centralization in the DeFi space.
The primary operational risk associated with this “paradoxical high degree of concentration” in DeFi relates to the physical infrastructure that hosts blockchain nodes, with cloud service providers playing a central role, as outlined in the summary.
The summary notes that the “vast majority” of respondents support the continued deployment of DeFi on public blockchains rather than private or permissioned ones. However, it is acknowledged that these blockchains should undergo regular audits. Furthermore, proposals for the regulation of intermediaries and the certification of smart contracts received widespread consensus.
In conclusion, the ACPR deems it advisable to establish rules for certifying smart contracts, define governance structures to protect DeFi customers, and implement measures to support the blockchain infrastructures of the DeFi sector.
On October 11, the European Securities and Markets Authority (ESMA) also contributed to the DeFi discussion. In a 22-page report, the ESMA acknowledged the potential benefits of DeFi, such as improved financial inclusion, the development of innovative financial products, and enhancements in financial transaction speed, security, and cost-efficiency. However, it also underscored the “significant risks” associated with the DeFi space.
