Decentralization is a crucial aspect of blockchain networks, empowering individuals and enabling the evolution of the Internet into Web3. However, there are growing concerns about global regulatory trends that threaten the decentralized and permissionless nature of these networks. While some regulations may aim to address risks associated with cryptoassets and DeFi, they risk unintentionally forcing blockchain networks to re-centralize, undermining years of progress and personal digital agency.
The Basel Committee for Banking Supervision, an international standard setter for banks, recently expressed concerns about the risks posed by permissionless blockchains and suggested imposing higher bank capital charges on fiat-backed stablecoins held on these networks. However, this approach fails to address the main threats to stablecoins and disregards the inherent resilience of public permissionless blockchains. Unlike permissioned networks, public blockchains have thousands of nodes, making them highly secure against cyberattacks.
Furthermore, the International Organization of Securities Commissions (IOSCO) finalized its DeFi policy recommendations for securities regulators, emphasizing the identification of “Responsible Persons” in decentralized exchanges. This overlooks the fact that decentralized exchanges, by their very nature, do not have a controlling party. Such broad definitions and requirements risk stifling innovation and hindering the growth of DeFi.
Regulations extend beyond the financial sector, with the European Parliament approving the EU Data Act that mandates kill switches for smart contracts. This requirement assumes the existence of a central intermediary with control over smart contracts, effectively re-centralizing their operation. Additionally, global anti-money laundering rules, such as the EU’s Anti-Money Laundering Regulation (AMLR), may impose transaction limits on self-custodied wallets, favoring cash transactions over digital money, despite cash being the preferred choice for illicit actors.
By preserving the status quo and favoring traditional finance (TradFi) over decentralized finance (DeFi), regulators risk centralizing power in established institutions and failing to protect personal digital privacy. Instead, regulators should adopt rules that encourage the maturation of blockchain networks as public digital infrastructure, promoting personal digital agency and ensuring a fair and inclusive future for the Internet.
The source of the article is from the blog mendozaextremo.com.ar