AFME warns regulators against including DeFi in the MiCA framework, citing concerns. It advocates excluding DeFi from the regulatory framework. AFME study emphasizes embedding DeFi in regulatory frameworks. Minimizes arbitrage and maintains the efficacy of new regulations. Title: “Decentralized Finance – Principles for Building a robust digital economy.”
DeFi and other new paradigms are currently not covered by the EU’s recently implemented MiCA legislation. The AFME raised worries that this exclusion would encourage regulatory arbitrage and make it harder to apply developing standards. The study stresses actively monitoring and managing DeFi-TradFi overlap to mitigate risks to financial stability.
The AFME classified current DeFi activities as outsourced innovation and research and development laboratories for the formal financial sector in recognition of the tremendous innovation DeFi offers to the financial system. In light of this, the study suggested that the EU create a DeFi taxonomy to appropriately categorize DeFi activities and digital assets. This taxonomy would act as the basis for developing an extensive regulatory answer that tackles the particular problems presented by DeFi.
AFME Vision: Advancing DeFi Regulation for a Strong Digital Economy
AFME advocates a risk-based approach to DeFi regulation. Calls for a unified legal framework covering decentralization degrees. The strategy aligns regulatory control with the unique dangers and traits of different DeFi platforms. Ensures tailored approach to DeFi regulation.
The AFME seeks to advance a strong and well-regulated digital economy by urging the inclusion of DeFi in MiCA regulation and requesting the creation of a thorough taxonomy. Incorporating DeFi into regulatory frameworks creates a cohesive and safe financial ecosystem. Benefits traditional and decentralized finance. This would also assist to promote innovation and reduce possible risks.