Selected Publications: Decentralized Finance

19. Dezember 2020, von Pedro Magalhães Batista

Foto: CC

The last issue of the Journal of Financial Regulation has an exciting article by Dirk Zetszhe, Douglas Arner, and Ross Buckley, "Decentralized Finance." The paper presents how new technologies, the known ABCD (AI, Blockchain, Cloud, and Data), have been allowing a new financial environment to emerge - even if not the utopia DeFi proponents have in mind. This new environment, according to the authors, is already challenging the traditional regulatory framework, impacting the notions and effectiveness of jurisdictions, enforcement, and data protection and privacy. Moreover, the DeFi movement leads to increased tech risk caused by technology dependence, connectivity problems, and lack of support points.

To deal with this new environment, the authors argue for enhanced cooperation among competent authorities, tech risk management, and the establishment of data and reserve locations to facility accountability. The authors also suggest that regulatory technologies ('RegTech') should assist financial supervision and enforcement, possibly through what they name "embedded supervision," in which regulation is automatically enforced, and open data and access to services when the DeFi environment might lead to reconcentration. Many other great issues are debated in their article, which should compose the bibliography of every legal scholar curious about the future of finance.