The decentralized finance sector of the crypto industry gained massive plaudits and recognition from mainstream media after several projects made sporadic rise some months back. Looking back at the events after the pandemic, the decentralized finance sector proved analysts and experts that has predicted that the sector was doomed to fail wrong.
Even though the decentralized finance sector has lost its light in terms of an upward surge, the sector is gradually trying to rediscover the dorm that saw it break several records and touching some of the highest value going by its total value locked. Despite the sector looking promising, one thing that is giving authorities and law enforcements nightmare is how to regulate the sector.
CFTC members say that DeFi sector is a game-changer
While this is being considered, the Commodities Futures Trading Commission put the DeFi sector to the sword in a recently held virtual meeting. Despite an attendee of the meeting noting that the new sector was a game-changer in the industry, he also stressed that they had a big task on their hands in terms of regulating the sector. During the meeting, the Technology Advisory arm of the CFTC presented a report where they touched everything about the decentralized finance sector.
According to the report that was submitted, the group touched several protocols in the DeFi sector, especially the ones that offer financial services such as lending, loans and assets locking. Working in contrast with the way traditional financial institutions work, the DeFi sector makes use of smart contracts to complete orders to reduce several costs that should have been spent.
The report that was presented by the Technology Advisory arm didn’t just stop at the overview of the DeFi sector; the report took an in-depth look into the sector and how it can be regulated. Also, the report considered the various method that the CFTC can adopt in regulating the DeFi sector without stagnating the progress of the protocols on it.
Committee says liability is the main issue of the DeFi sector
Even though the virtual meeting talked about the various potential that the decentralized finance sector possessed, it failed to address one integral aspect, which is the use of the sector for scam and hack activities by malicious actors. According to the United States CFTC, one of the biggest challenges that the sector has posed is a way to determine its liability. According to a motion that was raised by a member of the committee, Gary DeWaal, he noted that direct liability should be attributed to members of the developer’s team of the respective decentralized finance protocols.
That approach might look like the best approach, but it has so many issues wrong with it, one of which is the infringement of the first amendment right to free speech across the United States of America. If the right infringement is cancelled out of the equation, if authorities arrest members of the developer team, it doesn’t mean that the protocol would not still be running on the blockchain. One o the key blockchain that has given such privileges to developers and their protocols is the Ethereum blockchain which is seen as a censor resistant blockchain.