A subsidiary of the Bank of France presented a report to the public on October 12. According to the report published by the French Prudential Control and Resolution Authority (ACPR), it includes the details of a public investigation conducted on decentralized finance (DeFi) platforms. The institution recommended the certification of smart contracts, protection of users’ legal rights, and the implementation of measures supporting the blockchain infrastructure of the DeFi sector.
Noteworthy DeFi Comment from the Financial Institution
In the two-month research covering April and May, analysts discussed possible regulations for DeFi in the country. Surprisingly, the institution reached a conclusion at the end of their research, supported by external assistance. The report stated:
“Therefore, ACPR believes that the term ‘decentralized’ is more appropriate than the term ‘unmediated’ for the ‘decentralized finance’ concept.”
According to the institution, the existing system in DeFi platforms is related to the operational risk of a paradoxical high degree of concentration. Additionally, in the sector where storage service providers play a central role, the blockchain ecosystem data actually comes with a physical infrastructure.
In the summary published by the institution, the majority of users argue that the DeFi sector should continue to be used in public blockchain systems rather than private or permissioned ecosystems. Ethereum and Bitcoin can be given as examples for public blockchain ecosystems.
However, users also argue that public blockchain ecosystems should be regularly audited. The suggestion of regulating intermediary platforms and certifying smart contracts received full marks from all participants.
European Union and DeFi
As a result of all these studies, ACPR found it “advisable” to establish rules for the certification of smart contracts, protect the legal rights of users involved in the DeFi sector, and take measures supporting the blockchain infrastructure of the DeFi sector.
A similar step was taken by an organization of the European Union on October 11. The European Securities and Markets Authority (ESMA) also joined the discussions about DeFi. In a 22-page report, ESMA officials accepted the promised benefits of the DeFi sector, such as increased financial inclusivity, development of innovative financial products, and improvement in the speed, security, and costs of financial transactions. However, ESMA also highlighted the significant risks in the DeFi sector.
