Regulating the Unregulated: Response Strategies for the Upcoming DeFi Regulationsn - Marina Markezic

time for questions after the presentation my name is Marina and I'm a co-founder of the European crypto initiative which is an advocacy group that works in Brussels so we are talking to The Regulators that want to regulate crypto defy centralized exchanges wallets Etc I am Florian another co-founder of this initiative we are both attorneys so we're very excited to tell you about regulation in Europe and also how it affects other ecosystems like the American one please Marina go ahead So today we're talking about the regulation of D5 as of today we don't have any regulations specifically tailored to defy not even in the EU as you all know there are some regulations that are specifically targeted centralized exchanges or centralized service providers but not yet taxes so we'll tell you a little bit about some of the strategies that we can use or we can use when talking to Regulators because they are definitely thinking about how to regulate d52 at least in Europe so to predict the future let's start it with the past let's see how last year was so after the really negative news from Mostly centralized entities like Celsius and FTX that's misappropriated our funds and basically committed fraud it was not a very positive feedback to the regulators and to the outside world even within our community we were not very happy of how these funds were used so the result in a way was very imminent was immediate in the U.S there was a lot of discussion around regulating centralized exchanges preventing FDX from happening in the EU we already had the markets in crypto assets regulation which has already been almost finalized so they were not major changes when regulating exchanges but what is also very interesting and important is that there's a lot of international organizations like the financial stability board oecd and others that are looking into defy this year so for them this year 2023 is the year of D5 and at the end of this year we're going to see all these reports finalized and they will definitely influence also local jurisdictions like the EU and the US so why do you need to learn about the EU why are we even talking about it the EU has finalized the first regulation on crypto assets which is called the markets in crypto assets regulation and it regulates the issuance of crypto assets and also crypto asset service providers only last week there was the U.S delegation coming to Brussels to learn more about this regulation and we are seeing an increased interest from other jurisdictions into what the EU Regulators are doing so basically what is um what Mika says is opposed to what we hear Lately from the U.S regulators and especially the SEC most of the tokens you use today so most of the utility tokens are not going to be Securities they're going to be crypto assets speaking from the legal point of view which means that they're going to be a completely new asset that never existed before and there's no discussion about them being Commodities or Securities we just invented a completely new asset class and that I think is quite positive among those crypto assets we have utility tokens and we have also stable coins so in Europe stable coins are not Securities or financial instruments as we call them they mostly are going to be e-money tokens that were regulated very similarly even before crypto even existed it's called e-money and it was a digital money that it was used before in your up so just to recap on what's happening this year 2023 we have new regulation in Europe on crypto assets we have regulation on AML anti-money laundering dictating kycing for a lot of different activities and we have a lot of activity also coming from the SEC but not a regulation as you well know and as I mentioned a lot of reports thinking and from coming from International organizations thinking about D5 and now let's go to Florian he will tell us what will happen in the future thank you I got my own microphone now um yeah so what about defy right so Europe regulated crypto assets had regulated it regulated stable coins but it has not yet oh it's a laptop okay thank you very much um so D5 hasn't been regulated yet and the EU is thinking more and more about how to do that and um there was a report um some research commissioned by the EU on what um and the various approaches to D5 regulation could look like and I just want to go with you through the ones that we've seen so far so one proposal is to restrict defy regulation to activities of regulated entities that want to venture into defy so you're you know a regulated exchange you want to offer some D5 products or you're a bank and you want to offer yield farming to your unsuspecting customers then you would have to basically um register with the authorities and register your wallets to make sort of make it more transparent so that's one proposal it would really not regulate defy in in a more strict sense it would really be only regulating the periphery around it another proposal we saw um in this report that the commission commissioned is this idea of a voluntary compliance framework you could also call this a Sandbox we haven't really seen sandboxes take off anywhere in the past so um unclear whether this is something that is really going to happen in Europe um another proposal is this idea of a public Observatory for D5 so this would be almost like before any concrete regulation uh The Regulators would basically set up observatories to understand um you know what are people even doing in this market um the question is of course with ZK technology on the horizon how much public observability is there really going to be in the near-term future right so uh that's a big question and I think another really interesting one is this idea of regulating oracles since oracles have such a critical uh role to play in in D5 protocols for you know pricing of assets um they are obviously a weak spot we've seen it with mango markets we've seen it with other sorts of cases in the past if the Oracle Falls typically the protocol Falls so um there is I think a high likelihood that oracles will become sort of regulated um in order to understand how the Define regulation will go let's look at how Mika so this now already existing crypto asset regulation in Europe went the way it went is that basically the commission ideated this this piece of law in 2019 it publicized their idea in 2020 and then two years later in 2022 there was a political agreement on what this regulation should look like and now in 2024 it will be finally applicable so you can see about five years between ideation and entry into Force so if you look at this Mika II so the potential defy regulation dedicated defy regulation in Europe basically we're now in 2023 which is the equivalent of something like 2019 2020 compared to the previous regulation so we can expect that in about 26 27 28 this new law should enter into Force um and what it really means is that now is the time to get engaged in Europe in order to have impact and influence on this regulation so um we want to ask all of you what in your mind would a good regulation of defy look like should it be regulated at all if so what are the kinds of things that you know we need to sort of introduce in terms of rules into this Market in order to scale to a mass consumer adoption and you've seen some of the proposals from the commission I went through them I'm sure there are many more good ideas we had a workshop yesterday with some people that we focus on this idea of information asymmetry where our information asymmetries in defy um you know let's say you're running an interface and you get a lot of information about order flow you can front run people instead of information asymmetry that should be regulated in D5 so a lot of ways to think about what good regulation could be like UCI is your place and your community to actually have influence on this so scan this QR code join our Telegram and help us you know shape the future regulation of D5 in Europe and by extension most likely the way D5 is going to be regulated in other places like the Us and other jurisdictions so um that's it from me and I think I think we are done right at a time so thank you so much for listening thank you very much everybody [Applause]