Regulation
How Ethereum Group Plans to Outpace Restrictive Cryptocurrency Laws With New Playbook – DL News
- The Enterprise Ethereum Alliance has released its first DeFi risk assessment guidelines.
- The guidelines aim to help DeFi protocols meet regulatory requirements and inform regulators.
Industry group Enterprise Ethereum Alliance wants to prevent new cryptocurrency laws that stifle innovation with a new playbook.
It is Guidelines for DeFi Risk Assessment is a detailed manual detailing the risks of working with DeFi, and how to assess, manage, account for, and mitigate them.
Such guidelines are necessary due to regulatory ambiguity and a general lack of accounting standards and guidance for DeFi in laws such as the EU’s. Crypto-asset markets regulations, the EEA says.
“There are no details on the security reporting requirements expected from the project to be compliant,” said Dyma Budorin, co-chair of the EEA’s DRAMA working group and CEO of blockchain security firm Hacken. DL News.
These guidelines will enable DeFi protocols to take a proactive approach to compliance, while helping regulators draft regulations that do not stifle innovation.
The move comes as regulators and politicians have put pressure on the industry by threatening anti-crypto laws, tax loophole cuts and a flood of implementing measures against the heavyweights of the industry.
Guidelines in action
The EEA guidelines cover seven main DeFi risks and contain sections on how to assess and manage these risks.
These include software threats such as smart contract exploits Or maximum extractable valueas well as broader considerations such as compliance and legal risks.
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There is also a long list of defined terms to help the uninitiated understand DeFi-specific jargon.
According to Budorin, regulators in the UAE and the EU are already using the EEA guidelines.
Not just for crypto natives
The EEA board is made up of crypto natives like Consensys Joe Lubin and Aya Miyaguchi of the Ethereum Foundation, as well as members of non-crypto-native companies, including senior employees from JP Morgan, Santander, and Microsoft.
The EEA said its guidelines will be relevant to both non-crypto businesses and regulators.
Budorin said they are also important for financial institutions assessing investment risks.
“They don’t know what the risks are in DeFi, and that’s why they’re not getting into it,” he said. “DeFi protocols that plan to cooperate with old money can use the DeFi risk assessment guidelines as a benchmark for best practices.”
The guidance comes as DeFi adoption among major traditional financial firms increases.
Global asset manager BlackRock this year spear its first tokenized fund on Ethereum.
Several other companies, including JP Morgan, Goldman Sachs, and HSBC, are also continuing their experiments with DeFi via tokenization.
Tim Craig is a DeFi correspondent at DL News. Got a tip? Email him at tim@dlnews.com.