EU Commission report suggests rethink of regulatory approach to DeFi

cointelegraph.com:

Analysts from the European Commission showed an unexpected understanding of how decentralized finances (DeFi) actually function, having defined it as something different from the traditional financial system and acknowledged that it would require rethinking the approach to regulation. 

On Monday, May 2, a crypto venture advisor at Presight Capital and a long-term expert on European regulation, Patrick Hansen shared some important details from the EU Commission's “European Financial Stability and Integration Review 2022”. A report, dated April 7, contains a 12-page chapter on DeFi, in which the authors demonstrate a sensible approach to the topic.

1/ In case you missed it, the EU commission wrote a chapter on DeFi in its "Financial stability & integration review 2022"It shows that the Commission staff is well aware of how DeFi works, incl. single protocols.A few selected quotes wrt policy https://t.co/K2GOpRBTWk pic.twitter.com/SrwYb4lXGV

The report defines DeFi as “a newly emerging form of autonomous financial intermediation in a decentralized digital environment powered by [...] ‘smart contracts’ on public blockchains.” It acknowledges the smart contracts to be “substitutes for regulated intermediaries” and suggests regulatory efforts to focus on communication with the specific DeFi teams that create these contracts.

Underscoring the difference between the DeFi and the traditional finance system, the report recognizes the key advantages of the former:

Special attention is drawn to the public blockchain’s potential for researchers and supervisors who can have free access to the entire time series of historical and real-time trading data, which, in turn, could help to better understand the risks that “often remain obscure in