The Autorité des Marchés Financiers (AMF) has said that the approach of “same activities, same risks, same regulation” should apply “unambiguously” when regulating DeFi.
The French markets regulator laid out its opinion on regulating decentralized finance (DeFi) in a discussion paper published on June 19.
However, the watchdog highlighted that DeFi poses more risks than the traditional financial sector. Regulators, therefore, need to address risks such as money laundering and terrorist financing in addition to implementing know-your-customer (KYC) procedures, as the use of pseudonyms is common in DeFi transactions.
Moreover, since DeFi activities often transcend borders, the AMF called for global cooperation in regulating the market. The discussion paper, which articulates the regulator’s “preliminary thinking” on DeFi regulation, noted:
“Due to the cross‐border nature and reach of DeFi activities, the AMF also supports the development of a global coordinated approach towards regulation to ensure a global level‐playing field, which should both aim to protect investors and foster innovation.”
Earlier this year, the Financial Stability Board said it is already working with global standard setters to determine the path to regulate DeFi. Additionally, two working groups for the international securities regulator IOSCO are scheduled to publish the recommendations on DeFi regulation by the end of 2023.
The AMF said it supports all these initiatives that will enable the emergence of a “balanced regulatory framework.”
Balancing innovation with customer protection
The AMF, which issues licenses to crypto firms in the country, noted that there is a need for a “clear framework with safeguards” for DeFi protocols. Recent market debacles like the Terra-Luna crash have only emphasized the lack of clarity in the space, the regulator noted.
According to the AMF, DeFi “legislation should be thought in a progressive and proportionate manner.” In other words, legislation should weigh the potential benefits of DeFi with the risks they pose to users.
The regulator added that the coming years will be crucial and doubly challenging for the DeFi sector. On the one hand, the sector has to find a transparent and secure means of growth that encourages innovation. On the other hand, the space has to provide “adequate levels of investor protection,” the AMF noted.
The post French regulator calls for global coordination on “same risk, same regulation” policy for DeFi appeared first on CryptoSlate.
