Global Securities Regulator Warns Against DeFi Risks

by in DeFi News

IOSCO DeFi regulations

Global regulator for securities, IOSCO (International Organization of Securities Commissions) composed of 33 securities regulators of various countries, released an extensive report on the DeFi industry. It finds that DeFi is rapidly growing to mirror the traditional financial markets.

Related: UK Central Bank Plans to Develop Crypto Regulations

The report expresses IOSCO's views on the fast-growing DeFi market, new products, services, and principal participants. According to the association, most of the new DeFi services replicate traditional finance, but DeFi has weaker regulation and presents more risks for investors.

Also, the release expressed doubts that DeFi is a P2P marketplace with no centralized control. IOSCO says exploring how DeFi works, it came to the conclusion that there are central actors in the sector, who often have control, for instance via governance tokens.

IOSCO says there is no general definition of DeFi, and what makes a product "decentralized." Along with its Fintech Network, IOSCO established a DeFi Working Group2 to examine where the DeFi sector has reached, what its typologies, and policy implications are.

However, DeFi supporters argue that the industry opens up new opportunities and goes beyond banking. A report by digital currency investment company GrayScale says DeFi is reshaping global finance and e-commerce.