DeFi: The Genie is out of the bottle
One thing is clear after this year’s P2PFISY: decentralised finance has definitely taken the main stage, and it’s time for big questions.
Leading a broad conversation is the best way to find a common ground.
That is precisely what the P2P Financial Systems International Workshop delivered on July 26 in Frankfurt. P2PFISY 2019 brought over 100 delegates, speakers, presenters and panellists from five continents to the European Central Bank to discuss and debate the current and future challenges of decentralised finance (DeFi).
Consensus can never be the aim of a vigorous debate on the future directions of decentralised finance. But threads of common ground can anchor that debate. It begins with an agreement as to which questions are the right ones to ask. It is clear that, for all of our participants, the basic question for decentralised finance is not if, but when.
Since its first edition in 2015, P2PFISY has been a forum where academics, policymakers and market participants can meet and exchange ideas about emergent technologies. This year was no different, as we welcomed participants from across the spectrum: from founders and CEOs to research fellows, regulators, policy analysts, economists, and entrepreneurs of many disciplines.
The underlying question permeating the entire workshop was, does DeFi require a rethink of the fundamentals of our economy, or is it just an incremental step towards ever-increasing digitisation?
Addressing this issue in his opening keynote talk, Paolo Sironi took us back to basics and urged a reevaluation of the economic understanding of rationality amongst market participants. In an era of fundamental uncertainty, it’s no wonder that entirely new business models and ways of organising economic activity are taking hold and developing fast.
DeFi is one of them; and as our paper presenters showed, it is a rapidly maturing area of academic research. We have clearly moved far beyond mere speculation, into real use cases of DeFi and sophisticated modelling of decentralised financial markets.
Many of the papers presented also underlined the question of how the challenges of emergent tech and DeFi can be engaged with proactively by regulators and market supervisors.
But any discussion of how new technologies and business models should be regulated must inevitably touch upon the diverging views as to which approach regulators themselves should take. Is the mindset of ‘technological neutrality’ still a valid approach to the group of technologies (blockchain, AI, big data) that is driving the adoption of DeFi? Can the current regulatory framework accommodate these new developments, or do they call for a radical rethink?
These were the questions at the heart of the Regulatory Panel’s discussion. While settling any of these questions or finding consensus on a regulatory position was never the intention of the workshop, it was clear that the supervisors represented on the Panel were highly attuned to the direction of DeFi’s travel. It was one step.
A similar message was signalled at the Industry Panel. Several members of business and enterprise reported close and productive engagement with the regulators in their jurisdictions.
However, it was in this very panel that the biggest questions were asked. What are the regulatory boundaries? How far can decentralisation go? Are corporate entities next to decentralise?
Finding these answers won’t be easy, but the tone of the debates is encouraging. And it is clear that regulators are open to exchanging ideas and engaging productively with those who are driving forward the development and adoption of DeFi.
This has been P2PFISY’s purpose from its inception. Finding solutions is only possible if one asks the right questions — and we look forward to the questions we’ll get next year, on P2PFISY 2020.