On October 12, the Authority for Prudential Surveillance and Resolution (ACPR), part of the French Central Bank, published a report summary From its public consultation on the regulatory framework for decentralized finance (DeFi).
The public consultation ran for two months, from April to May 2023, in response to the initial paper discussing potential regulations for decentralized finance in the country. External contributions led the ACPR to make surprising discoveries, especially regarding the structural continuity of centralization patterns:
“The ACPR therefore believes that the term ‘disintermediated’ finance is more appropriate than the term ‘decentralized’ finance.”
The operational risks of this “paradoxically high degree of concentration” in DeFi relate to the physical infrastructure that hosts blockchain nodes, in which cloud providers play a central role.
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According to the summary, a “vast majority” of participants advocate that DeFi should continue to be deployed on public blockchains rather than private or permissioned ones. However, they admit that this blockchain needs to be audited on a regular basis. Proposals to regulate intermediaries and certify smart contracts have also met with broad consensus.
In conclusion, ACPR considers it “useful” to establish rules for certifying smart contracts, define governance that will protect DeFi customers, and put in place measures that support DeFi blockchain infrastructures.
On October 11, the European Securities and Markets Authority (ESMA) also commented on the discussion on decentralized finance. In a 22-page report, the Securities and Markets Authority acknowledged the promised benefits of decentralized finance, such as increasing financial inclusion, developing innovative financial products and enhancing the speed, security and costs of financial transactions, while also highlighting the “significant risks”.
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