France’s Regulatory Authority Endorses Global DeFi Regulations

France’s top financial regulator, the Autorité des Marchés Financiers (AMF), has expressed its support for globally coordinated regulations in the decentralized finance (DeFi) sector.

In a recently published discussion paper, the AMF shared its initial thoughts on the regulatory challenges posed by the decentralized and “disintermediated” protocols that form the foundation of the DeFi ecosystem. The paper delves into defining DeFi, including decentralized governance systems such as DAOs, as well as automated “smart contracts” that facilitate transactions. It also highlights associated risks and control levels for further debate.

Recognizing the cross-border nature of DeFi activities, the AMF emphasizes the importance of a global coordinated approach to regulation. Such an approach would ensure a level playing field worldwide, safeguard investors, and foster innovation. The paper states, “the AMF also supports the development of a global coordinated approach towards regulation to ensure a global level‐playing field, which should both aim to protect investors and foster innovation.”

During a meeting with reporters in May, Benoit de Juvigny, the Secretary General of the AMF, mentioned that this paper would contribute to EU policy discussions on DeFi. He acknowledged the complexities in categorizing participants within the sector, unlike traditional finance.

International standard-setting bodies like the Financial Stability Board (FSB) are also actively working on establishing standards for the DeFi industry. A working group within the International Organization of Securities Commissions (IOSCO) is set to release recommendations by the end of the year.

The AMF fully supports these global initiatives and intends to enhance its engagement with both public and private stakeholders. The goal is to foster the development of a balanced regulatory framework that supports the long-term growth of decentralized finance. The AMF’s paper states, “The AMF fully supports these initiatives, and intends to increase its engagement with stakeholders, both public and private, with a view to allow the emergence of a balanced regulatory framework that will help support the sound development of decentralized finance in the long run.”

While many jurisdictions are already regulating centralized cryptocurrency exchanges, overseeing DeFi protocols presents a unique challenge due to the absence of a specific entity to target for compliance. The AMF is inviting industry stakeholders to contribute to the proposed discussion points outlined in the paper until September 30.

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