The International Monetary Fund (IMF) has proposed a series of measures aimed at regulating the decentralized finance (DeFi) sector.
The body spelled out its preliminary recommendations in the latest chapter of its Global Financial Stability report, which is entitled “The Rapid Growth of Fintech: Vulnerabilities and Challenges for Financial Stability.”
In the document, the report’s authors recommended that “as a first step,” regulation should focus on “some elements of the crypto ecosystem that have enabled the development of DeFi” – namely stablecoin issuers, centralized crypto exchanges, and hosted wallet service providers.
However, the IMF also claimed that this kind of proposed regulation could also extend to reserve managers, network administrators, and market makers – all of whom would, the body wrote, “benefit from robust and comprehensive national regulatory frameworks delivered through common global standards by standard-setting bodies.”
The authors suggested that such “centralized entities” in the “cryptoasset ecosystem” could provide regulators with “an effective liaison for regulators to address the risk of rapid DeFi growth.”
But the authors also outlined a “second step” in regulatory policy that would involve national authorities “directly” regulating what they called “key functions within DeFi.”
Such “measures,” the authors explained “could include” a “public-private collaboration on code regulation” through “either ex-ante guidelines on operational and risk parameters or ex-post code reviews and audits that can identify areas vulnerable to risk and help deliver policy objectives.”
The body suggested promoting transparency and boosting “user education to help identify platform-specific risks,” which it claimed
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