The Committee’s Technology Advisory Division, which was released today, discussed DeFi apps’s advantages and disadvantages, in addition to developing restrictions against “rogue” devs or legal provisions that would help investors to piling into the space.
Aaron Wright, Professor of Law and Gary DeWaal, engaged in the debate with Dubbed the “The Growth and Regulatory Challenges of Decentralized Finance,”. They briefly explained how the Uniswap decentralized exchange protocol operates, how users have liquidity and run trading pairs and receive fees from the platform’s trades. For regulators and crypto users both, an important takeaway from the meeting was that the lawmakers acknowledged that DeFi apps opened the floodgates to financial inclusivity and enabled any retail user to take part in the functions of the protocol without meeting any predetermined criteria.
Wright, in particular, discussed that such software helped provide greater financial flexibility: “An interesting benefit of decentralized financial projects is that they’re composable and interactible. Developers often describe them as financial Lego blocks.”
Given the advantages and positives offered by DeFi apps, the lawmakers pointed out legal considerations, often overseen by DeFi builders and developers in particular. “These contracts are alegal. That doesn’t mean that they are illegal. It means they are designed at a technical level, not necessarily with regulatory compliance in mind,” Wright said.
DeWaal indicated that most fintech technologies in the US are subject to strict regulatory guidelines and regulations, which have not been properly adopted by DeFi apps so far.