To properly regulate DeFi, we must first determine whether these protocols are actually decentralized, according to European Parliament vice president Eva Kaili.
At the World Economic Forum Annual Meeting, Eva Kaili gave an interview, which some of us might find scarry.
When asked about decentralized finance (DeFi) Eva Kaili was rather harsh. According to her most DeFi protocols aren’t truly decentralized. Even those which are quite popular for DeFi staking and loaning.
This means we need proper regulations in place to understand the inner workings of this emerging technology, says Eva Kaili.
Why aren’t DeFi decentralized?
Kaili was asked to outline her definition of DeFi. By definition, DeFi is “completely decentralized,” she said, which means that “nobody can control or manipulate a blockchain.”
Achieving decentralization is no easy feat, though.
Most of them are saying they are, but they are not, Kaili said.
She further explained the need to define ecosystem players as part of a broader regulatory framework.
“We need to understand who is a developer, who controls that, what are the keys, if somebody can change the code or not, where is the jurisdiction.”, she explained.
“It’s not an easy exercise. This is what disruption is. It’s out of the box challenges that we need to see and ensure we work around that with smart regulation.”, Eva Kaili pointed out.
What can this mean to DeFi?
Eva Kaili has been a member of the European Parliament since 2014.
She has been a vocal supporter of Bitcoin and blockchain technology for quite a while.
She is known for outlining that blockchain technology gives us the tools to strengthen and improve existing systems through trust and stability.
Concerns about DeFi’s governance structures are nothing new. Many ardent Bitcoin supporters arguing that the industry lacks a true monetary alternative to Bitcoin. The question is whether DeFi that are supposed to be decentralized, are indeed free of any control by the overseeing organizations.
Many experts worry that most DeFi projects are governed by organizations that can modify their protocol at will.
Although Kaili raised concerns about whether DeFi protocols can truly be regarded as decentralized, European regulators appear to have broadened their understanding of the industry.
An April report by the European Commission defined DeFi as a “newly emerging form of autonomous financial intermediation” that’s outside the traditional finance industry. The report also recognized the need to rethink Europe’s regulatory approach on the matter.