The truth is that the stage is now set to foster creative activity, and decentralized infrastructure is there to help the creative economy march forward.
Pointing at Germany’s crypto license as one example of a supportive piece of legislation, Birgit Rodolphe, explains that similar frameworks should be adopted in the entire EU to avoid fragmentation.
Fragmented Policies on DeFi Poses Risk to Customers in EU
Birgit Rodolphe, the executive director at the Germany’s Federal Financial Supervisory Authority (BaFin), has called for the adoption of innovation and uniform policy on the decentralized finance (DeFi)
BaFin is the main German body responsible for regulating insurance firms, banks, and financial institutions, including crypto-related companies. It is also responsible for issuing crypto custody licenses that all firms targeting to provide crypto-related services in Germany must-have.
In one of the articles on BaFin’s website, Rodolphe warned of possible risks to customers of unregulated DeFi space and pointed out the importance of standardized policy in all EU countries.
“One thing is clear: the clock is ticking. The longer the DeFi market goes unregulated, the greater the risk for consumers, and all the greater is the danger that critical offers that have systemic relevance will establish themselves,” expressed Rodolphe.
He cited risks such as hacks, technical issues, and fraudulent activities that have resulted in people losing millions. As it stands, Rodolphe indicated that DeFi is not as democratic as most of its proponents posit. Most DeFi protocols are freely operating outside the regulations because they are new technologies.
Innovative Policies Making Germany Attractive to Crypto Companies
Rodolphe further pointed out that borrowing, lending, insurance, and other products outside the conventional financial system are subject to strict supervision and licensing. Therefore, DeFi requires the regulators to set clear rules that will give all providers legal clarity.
He pointed out that BaFin’s innovative “crypto custody business license” that was introduced in January 2020 has been very attractive. This permit allows companies to provide different crypto services in the country. Four companies have already been approved and issued with the license in the country.
In Q1 of 2022, Germany was the most crypto-friendly country because of its zero-tax policy on long-term capital gains. Later on, in March, one of the studies done in Germany established that about 50% of the Germans were interested in going crypto.
In conclusion, Rodolphe indicated that DeFi regulations could not be weaker than the standard policies used in traditional finance because they can make DeFi-related products more attractive for companies to pursue from a regulatory point of view.