WEF Report Calls for Tailored DeFi Regulation to Mitigate Risks and Protect Consumers
Veronika Rinecker is based in Germany, studied international journalism and media management. She specializes in politics and regulation, energy, blockchain, and fintech. Since 2017, she has been...
The World Economic Forum (WEF) has called for stricter licensing measures and “clear sandbox objectives and support mechanisms” to address the challenges posed by the decentralized finance (DeFi) sector.
In its October report, titled ‘Digital Assets Regulation: Insights from Jurisdictional Approaches’, the WEF highlights the need for increased international cooperation and the adoption of “technology-enabled” solutions to effectively regulate the digital asset industry.
The report examines the regulatory landscapes of nine jurisdictions and offers recommendations for policymakers, regulators, and private-sector leaders.
According to the WEF report, for DeFi, a sandbox-first approach, tailored licensing models, and prioritizing risk mitigation and transparency are crucial.
“Jurisdictions that show signs of progress in addressing the rapidly evolving DeFi ecosystem are those that address its complexity through a nimble, sandbox-first approach. Regulatory sandboxes provide a controlled environment in which developers can experiment with digital assets and decentralized protocols. This approach facilitates the development of guidelines and regulations that are both practical and forward-looking for industry players who aim to innovate in the space.”
The WEF report recognizes that DeFi applications vary widely in their use cases and associated risks. Some DeFi platforms may provide access to social media protocols, while others may facilitate decentralized identity management systems. These different applications require different
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