EU Commission Study Says DeFi Needs New Kind of Regulation

by in DeFi News

European Commission DeFi

The European Union Commission released a new report on the regulation and supervision of decentralized finance, which says the industry requires new rules. The report mentions key differences between traditional finance and DeFi, saying instead of relying on a legal entity, DeFi protocols are encoded in public digital contracts universally accessible and maintained by an open pool of pseudonymous agents.

Related: JPMorgan to Make Trillions of Dollars of Assets Available in DeFi

The EU Commission says although the value of DeFi tokens has fallen in 2022, the market cap of the 100 largest assets related to DeFi services was still averaging close to $100 billions.

Mentioning the rapid growth of the space along with opportunities and risks, the Commission finds there's a need for a seperate policy to regulate the DeFi industry. According to the entity, risk of independent vulnerabilities in DeFi may call for systemic measurements of security and stability in addition to auditing protocols separately. EC says public initiatives might not be guaranteed to achieve such goals efficiently.