Executive Director at Germany’s Financial Authority BaFin Calls out for Innovative EU-wide DeFi Rules
Germany’s Federal Financial Supervisory Authority BaFin called for innovative EU-wide regulations for decentralized finance (DeFi) in a blog post that was published on BaFin’s website.
Key Takeaways
- Birgit Rodolphe, Executive Director at German Federal Financial Supervisory Authority (BaFin), mentions in a recently published blog post on BaFin’s website that unregulated DeFi space is putting consumers at risk.
- She believes that EU-wide regulation for DeFi is the only way to protect European consumers from the risks.
- Citing Germany’s “Crypto Custody License” as an attractive crypto regulation, Birgit says that the EU should enact similar laws for decentralized finance.
The European economic powerhouse Germany is known for its positive outlook toward digital assets due to various measures that the German authorities took to regulate virtual assets in the country. Thus, it has been topping the list of most crypto-friendly countries globally for a while now, as evidenced by the more recent report prepared by crypto exchange Kucoin which placed Germany as the first of 46 countries.
Recently, Birgit Rodolphe, Executive Director at Germany’s Federal Financial Supervisory Authority BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht), called for innovative EU-wide regulations for decentralized finance (DeFi) in a blog post that was published on BaFin’s website.
Citing Germany’s crypto custody license as a positive and innovative approach toward digital assets, Birgit states that the European Union must also enact similarly attractive regulations for virtual assets. She reasoned that European consumers are at risk from the unregulated, decentralized finance space.
Looking at the share of DeFi hacks in all the crypto hacks that took place in 2021, it’s clear that Rodolphe is right about consumers losing millions due to “technical issues, hacks, and fraudulent activity” due to unregulated DeFi space. For instance, in 2021 alone, 76% of hacks in the cryptocurrency industry were from the DeFi space.
Thus, Rodolphe believes that the only way to mitigate these risks is to adopt innovative yet attractive decentralized finance regulations. She explains that EU-wide rules for the decentralized finance space will also ensure the nascent DeFi isn’t fragmented.
Although Rodolphe wants the European Union to draft attractive regulations for the DeFi space, she disapproves of the notion that the DeFi industry is all virtuous. She further points out that just because decentralized finance is based on new-age technologies, it cannot absolve the industry from playing by the rules and following the law of the land.
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