On the matter of regulating DeFi, a recent TRM Labs-Ripple leads roundtable set out to delve into the challenges and opportunities that legislators will face in trying to regulate DeFi. Participants would include Ripple President Monica Long who focused on the need for cooperation to guarantee that innovation is answerable, to deal with the perils and ensure consumers.
Borderlessness poses a prominent challenge to DeFi, since borderlessness may be exploited to engage in a practice known as regulatory arbitrage. Growing activity sharing between jurisdictions was regarded as an important aspect that would promote an increase in transparency levels while at the same time enhancing the regulators’ ability to develop the most effective standardization frameworks.
Also, the roundtable touched on the concept of compliance by design, an emerging idea that incorporates compliance demands directly into DeFi protocols through smart contracts. This could relieve burden on regulators and save costs at the same time, promoting efficient financial products to the users.
In totality, the roundtable underscored the need for a more collaborative approach and a “Compliance-First Mindset” in establishing the future of DeFi regulation.
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