{"id":5366,"date":"2023-10-14T11:55:08","date_gmt":"2023-10-14T11:55:08","guid":{"rendered":"https:\/\/coinengineer.io\/blog\/?p=5366"},"modified":"2023-10-14T11:55:08","modified_gmt":"2023-10-14T11:55:08","slug":"eu-regulator-warns-about-defi-risks","status":"publish","type":"post","link":"https:\/\/coinengineer.net\/blog\/eu-regulator-warns-about-defi-risks\/","title":{"rendered":"EU Regulator Warns About DeFi Risks!"},"content":{"rendered":"

The European Securities and Markets Authority (ESMA)<\/strong>, and the EU regulator published a report summarizing numerous risks to investors and financial stability stemming from DeFi<\/strong>.<\/p>\n

The report stated, \u201cDespite the investor’s exposure to DeFi being generally small, there are serious risks to investor protection due to the highly speculative nature of many DeFi<\/strong> regulations, significant operational and security exposures, and the absence of a clearly defined responsible party\u201d.<\/p>\n

An independent EU<\/strong> official cautioned that DeFi operates without trustworthy intermediaries and this could \u201cotherwise reduce risks related to financial stability and investor protection\u201d.<\/p>\n

You might like: <\/i>Coinbase Ramps Up Pressure Against SEC!<\/strong><\/em><\/a><\/p><\/blockquote>\n

Risks of DeFi<\/h2>\n

The report warned against the \u201crule is law\u201d principle which it claimed prevailed in current DeFi governance.<\/p>\n

The regulator stated, \u201cSmart contracts continue to be an unregulated phenomenon, exemplified by the accepted principle\u2019s concept of \u2018code is law\u2019<\/strong>\u201d. It added that adherence to this principle creates a tendency to accept results of smart contracts \u201cregardless of any moral or legal matters\u201d.<\/p>\n

The study concedes that DeFi\u2019s<\/strong> automatic, immutable functions pose less risk. However, it highlighted that the developer’s pseudonym could facilitate the proliferation of illegal smart contracts.<\/p>\n

The article added, \u201cThe pseudonyms of developers implementing smart contracts and their lack of accountability, support the rise of \u2018illegal\u2019<\/strong> smart contracts like Ponzi<\/strong> schemes\u201d.<\/p>\n

The regulator said that the flexibility of smart contracts could lead to system failures.<\/p>\n

It added in the article, \u201cThe flexibility feature of smart contracts, which allows DeFi<\/strong> protocols to be built on top of each other and provide various services for users, also leads to contagion risks by creating dependencies between the protocols\u201d.<\/p>\n

\n

In the comment section, you can freely share your comments about the topic. Additionally, don\u2019t forget to follow us on\u00a0Telegram<\/strong>,\u00a0<\/a>YouTube<\/strong><\/a>,\u00a0and\u00a0Twitter<\/strong><\/a>\u00a0for the latest news and updates.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The European Securities and Markets Authority (ESMA), and the EU regulator published a report summarizing numerous risks to investors and financial stability stemming from DeFi. The report stated, \u201cDespite the investor’s exposure to DeFi being generally small, there are serious risks to investor protection due to the highly speculative nature of many DeFi regulations, significant<\/p>\n","protected":false},"author":2,"featured_media":5365,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[93,1985,1532,1984,1986,1987],"class_list":["post-5366","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-defi","tag-eu","tag-ponzi","tag-risk-of-defi","tag-the-esma","tag-the-eu-regulator"],"yoast_head":"\nEU Regulator Warns About DeFi Risks! - Coin Engineer<\/title>\n<meta name=\"description\" content=\"The ESMA and the EU regulator published a report outlining multiple risks to investors and financial stability from DeFi.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/coinengineer.net\/blog\/eu-regulator-warns-about-defi-risks\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"EU Regulator Warns About DeFi Risks! 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