World Economic Forum releases policy toolkit for DeFi regulations

With regulated DeFi becoming a topic of discussion within and outside the crypto industry, the World Economic Forum (WEF) has published a policy toolkit on DeFi.

World Economic Forum releases policy toolkit for DeFi regulations

The toolkit seeks to provide useful guidance for regulators and government policy-makers concerning DeFi regulations, according to a release.

The World Economic Forum (WEF) has partnered with the Blockchain and Digital Asset Project at the Wharton School of the University of Pennsylvania. Several DeFi entrepreneurs, legal experts, and financial regulators also collaborated in toolkit development.

Financial regulators involved in developing the policy framework include representatives from agencies in the United States as well as people from Europe’s planned Markets in Crypto Assets (MiCA) regulations.

WEF stated that the toolkit offers a foundational basis for examining critical factors concerning DeFi regulations. With national and intergovernmental bodies seeking to craft and enforce DeFi regulations, some stakeholders say smaller startups in the emerging industry might become disenfranchised.

According to Sheila Warren, deputy head of WEF’s Centre for the Fourth Industrial Revolution, such concerns are captured in the toolkit. “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,” Warren said.

“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,” Warren added.

As already stated by the co-founder of MakerDAO, Rune Christensen, regulatory clarity is necessary for DeFi to interact with real-world assets. These regulations will likely cover investor protection and Anti-Money Laundering concerns.

Data from DappRadar shows the adjusted total value locked in the DeFi market Currently is over $67 billion. Once a niche market space on the Ethereum network, DeFi is making a splash on other chains including the blockchain of the biggest crypto exchange - Binance Smart Chain.