Regulation
How Ethereum Group Plans to Preempt Restrictive Cryptocurrency Laws with New Playbook – DL News
- The Enterprise Ethereum Alliance has released its first DeFi risk assessment guidelines.
- The guidelines are intended to help DeFi protocols meet regulatory requirements and inform regulators.
Industry group Enterprise Ethereum Alliance wants to prevent new cryptocurrency laws from stifling innovation with a new playbook.
His DeFi Risk Assessment Guidelines is an in-depth manual that details the risks involved in working with DeFi and how to assess, manage, account for and mitigate them.
Such guidelines are necessary due to regulatory ambiguity and the general lack of accounting standards and guidelines for DeFi in laws such as the EU. Cryptocurrency Markets regulations, says the EEA.
“There are no specific details on what security reporting requirements the project is expected to comply with,” said Dyma Budorin, co-chair of the EEA’s DRAMA working group and CEO of blockchain security firm Hacken. DL News.
The guidelines will enable DeFi protocols to take a proactive approach to compliance, while also helping regulators craft regulations that don’t stifle innovation.
The move comes as regulators and politicians have pressured the industry with the threat of anti-crypto laws, tax loophole cuts and a flurry of coercive actions against the heavyweights of the sector.
The guidelines in action
The EEA guidelines cover seven key DeFi risks and contain sections on how to assess and address those risks.
These include software-based threats such as smart contract exploits OR maximum extractable valueas well as more general considerations such as compliance and legal risks.
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There is also a long list of defined terms to help non-experts understand the specific DeFi jargon.
According to Budorin, regulators in the United Arab Emirates and the European Union are already using the EEA guidelines.
Not just for cryptocurrency natives
The EEA board of directors is made up of crypto-natives like Consensys Joe Lubin and Aya Miyaguchi of the Ethereum Foundation, as well as members of non-cryptocurrency companies, including senior employees from JP Morgan, Santander, and Microsoft.
The EEA said its guidelines would be relevant to both non-crypto firms 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 are looking to partner with old money can use the DeFi Risk Assessment Guidelines as a reference for best practices.”
The guidelines come at a time when DeFi adoption among major traditional financial firms is accelerating.
Global asset manager BlackRock this year launched its first tokenized fund on Ethereum.
Several other firms, including JP Morgan, Goldman Sachs, and HSBC, are also continuing their experimentation with DeFi through tokenization.
Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.