The Global Coalition DeFi, a lobby group representing organizations from the United States, United Kingdom, Europe and Asia, related to decentralized finance, delivered a paper to the Financial Action Task Force (FATF), proposing a set of principles for healthy regulation of the sector.
The so-called coalition is made up of ACCESS from Singapore, Bitcoin Association from Switzerland, Blockchain Association from the United States, Blockchain for Europe, CryptoUK and the International Association of Trusted Blockchain Applications (INATBA). Altogether, there are about 350 companies associated with these organizations.
In the text, it proposes” the issuance of pragmatic and enforceable rules ” by the FATF. In this regard, they indicate that it is important for FATF to understand that, due to the rapid growth of DeFi, must ” properly align their approaches in this space”.
The Global Coalition accepts the imposition of KYC (“Know your Customer”) policies on DeFi platforms, something that has already been raised in the latest draft of the FATF Regulatory Guide. However, they promote that the same KYC process serve for various DeFi protocols, to avoid redundancy between each of the applications that usually interact with each other.
“To avoid overly redundant paperwork, financial intermediaries should be allowed to share customer information in order to meet KYC obligations,” the charter states.
On the other hand, they discourage the introduction of manual steps, for example, for identity verification, in purely digital processes. “A financial intermediary acting exclusively digitally must be allowed to rely entirely on digital data in its business process,” the document states.
They warn that creating regulations without first evaluating the sector it could “stifle innovation and prevent new ideas from emerging”. So they advise authorities to” maintain an ongoing dialogue “with the DeFi community to keep up with the latest developments to”respond appropriately, timely and flexibly”.
The letter concludes by saying that “closer collaboration” between regulators and global industry it will result in”more efficient and globally applicable regulatory principles”.
FATF postponed decision on DeFi
Decentralized finance is a sector of the economy that the FATF, an intergovernmental organization created to develop anti-money laundering policies, has closely followed.
Last June, they were due to ratify their new regulatory standards for Bitcoin, cryptocurrencies and digital asset service providers. However, after the end of its plenary session, rescheduled for October, the planned update, as reported by CriptoNoticias.
It is presumed that they postponed the announcement because there was not enough time to process and deliberate the volume of responses they received in a consultation that lasted until April.
Controversial FATF decisions
One of the reasons why the FATF, has caused some discomfort in the bitcoiner world, is by the regulations called the travel rule, by its effect on users ‘ privacy.
This rule states that exchanges and other service providers in the cryptocurrency industry must exchange customers ‘ personal data if the transaction amount exceeds USD 1,000.
Organizations like Coin Center, which advocate for users ‘ rights over open blockchain networks, have rejected the FATF rule regarding the use of Bitcoin, cryptocurrencies, and service providers that enable P2P exchanges, for being a problem for “privacy and innovation”, as reported by CriptoNoticias.