The regulatory arm of UAE’s financial centre, Abu Dhabi Global Market (ADGM), has released a discussion paper that is seeking stakeholders’ comments regarding the regulation of decentralized finance (defi). The paper also makes clear the regulator’s stance regarding the anonymity of defi transactions.
Paper not Guidance For Financial Institutions
The FSRA, a regulatory arm of the UAE financial centre ADGM, has issued a discussion paper that seeks the public’s comments on policy considerations for decentralized finance (defi).
The document’s release comes at a strong time for the defi industry, both in terms the volume and value of these transactions.
According to the regulatory arm, the discussion paper will serve “as a starting point for a dialogue on how Defi may be eventually regulated.” The FSRA nevertheless clarified that the paper is not a “guidance” for financial institutions. Instead, the paper contains the regulator’s view on the likely medium-term direction over the course of between five and ten years.
In addition, the discussion paper contains the regulatory arm’s so-called “high-level policy positions on how the FSRA might consider regulating Defi.” The document also describes what a future regulatory framework for defi will look like.
Defi Regulation Inevitable
Emmanuel Givanakis (CEO of the FSRA) stated the following in remarks after the paper’s launch:
DeFi is a part of the emerging global financial system that promises to provide more customized and efficient financial services. DeFi has the potential to help us realize our full potential. However, we must identify and address any risks. In collaboration with professionals in the industry, we are happy to share our opinions on DeFi’s future direction and the current discussion within the community.
Givanakis said that the inputs of stakeholders will assist the regulator in making informed decisions regarding policy, which will address the risk associated with decentralized financing.
Although the FSRA stated it would consider inputs from stakeholders, other parts of the paper state that defi regulation is necessary. The regulator also insisted that “preserving the anonymity of DeFi participants will increasingly become untenable in the medium term.”
The FSRA has established June 30, 2022 as the final date for comments. After the deadline, the FSRA reviews the feedback and will decide what next steps to take.
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