The FSRA is a regulatory arm for the UAE financial center ADGM. It has published a discussion paper seeking public comments on the policy considerations of decentralized finance (defi).
The document was released at a time when the defi space has experienced strong growth in both the number and the value of such transactions. This is what the FSRA acknowledged in their paper.
The regulatory arm stated that the paper would serve as a’starting point’ for a discussion on how Defi might be regulated in the future. However, the FSRA clarified that this paper is not intended to be a guide for financial institutions. The paper instead contains the regulator’s views on the likely medium-term direction for the period of five to ten years.
The discussion paper also contains the regulatory arm’s so-called ‘high level policy positions’ on how the FSRA might regulate Defi. It also shows what the future regulatory framework for Defi might look like.
Defi Regulation Inevitable
Emmanuel Givanakis CEO of the FSRA stated these words in his remarks after the launch of the paper.
DeFi, a new part of the global financial system, holds the promise to deliver more efficient and customized financial services. To realize this potential, DeFi’s risks must be identified and addressed. We are happy to share our opinions on DeFi and its future direction in the ongoing community discussion, along with industry professionals.
Givanakis said that the inputs of stakeholders will assist the regulator in making informed policy decisions, which will address the risks associated with decentralized finance.
Although the FSRA stated that it would consider contributions from stakeholders in its paper, the regulator claims elsewhere that regulation of DeFi is necessary. In addition, the regulator stated that “preserving the anonymity and participation in DeFi will become increasingly untenable in the medium-term.”
The FSRA has established June 30, 2022 as the deadline to submit comments. The FSRA will then review all feedback received and determine the next steps.