While embracing Germany’s cryptocurrency license as a great example of attractive regulation, Birgit Rodolphe further suggests that there should be a unified framework across the European Union to “prevent broken markets scenarios”.
The Executive Director of the Federal Finance Supervisory Authority of Germany (BaFin) Birgit Rodolphe has recently called for a rather innovative and uniform regulation for the Decentralized Finance(DeFi) space across the whole of Europe.
BaFin is a German financial regulator liable for regulating banks, insurers, and financial institutions, including cryptocurrency companies. Furthermore, BaFin is also the issuer of “Crypto Custody Licenses“, the companies seeking to provide cryptocurrency services in Germany are required to have this license before providing their services.
Rodolphe has also warned users of the unregulated DeFi space and has further called for a rather standardized regulatory approach while considering all EU member countries.
“While it’s clear that the clock is continuously ticking and that the lesser the DeFi market is regulated the greater is the risk possessed by the consumers from all the offers that are established by them.”
She further cited the potential dangers for the consumers that are due to the various technical issues, hacks, or any sort of fraudulent activities, as many have lost millions lost in this space, they further stated that DeFi is not as democratic and kind as it seems to be by its fans, rather than many of the DeFi projects are difficult of grasp by many.
She also concluded that DeFi protocols aren’t free to completely operate outside the regulatory framework just because they are using a newer segment of technologies:
Consider a case if I want to defer my crypto loan amount, to whom should I contact to Utopia or Dystopia, and what in case all my crypto assets disappear suddenly, and in both the cases it can be clearly seen that there is no sort of deposited fund protection in similar cases.
They called on regulators to impose restrictions on the licensing and monitoring of loans, loans, insurance, and other products outside the traditional economy and to provide legal clarity to DeFi providers.
“Crypto Custody Business” License, which was introduced in January 2020 was highlighted by Rudolphe as an attractive regulatory regime for crypto businesses.
The license allows the bearing company to support and provide crypto-based services, and thus as of now only four such providers have been approved, while most of the financial institutions have applied for it.
Rudolphe suggested that the regulatory framework should be applied the same across all the different European countries:
“Ideally, such regulations should be integrated across the EU to prevent a collapsing market and affect Europe’s overall reform potential.”
Recently Germany topped the list of most crypto-friendly countries in the first quarter of 2022 due to the zero tax policy on long-term crypto capital gains. According to a March 2022 report, nearly half of Germans are interested in investing in crypto.
In 2021, Germany made several moves related to crypto, including legal reforms and stricter restrictions on crypto businesses to adopt blockchain. The Central Bank of Europe has played a key role in examining the European Central Bank’s digital currency (CBDC).
The new DeFi regulations could not be weaker than existing standards for traditional financial products as concluded by Rodolphe, as it would make businesses more attracted to DeFi products from a regulatory perspective.
Read also: Top Korean crypto firm decides to sue Terra founder
BaFin seeks to introduce EU-wide DeFi regulation
https://bitcoinik.com/bafin-seeks-to-introduce-eu-wide-defi-regulation/feed/
https://bitcoinik.com/bafin-seeks-to-introduce-eu-wide-defi-regulation/feed/
