France’s top markets regulator, the Autorité des Marchés Financiers (AMF), has expressed support for globally coordinated regulations in the emerging field of decentralized finance (DeFi). The AMF, responsible for licensing crypto exchanges operating in the country, released a discussion paper outlining its preliminary stance on the regulatory challenges presented by DeFi protocols.
The AMF’s paper provides valuable insights into the world of DeFi, covering the decentralized governance systems known as DAOs and the intricate nature of automated “smart contracts.” The document also addresses associated risks and control levels, aiming to stimulate meaningful discourse and exploration of potential regulatory frameworks.
Given the cross-border nature of DeFi activities, the AMF emphasizes the need for a global level-playing field through coordinated international regulations. The paper states, “the AMF supports the development of a global coordinated approach towards regulation to ensure a global level-playing field, which should both aim to protect investors and foster innovation.”
Benoit de Juvigny, Secretary General of the AMF, had previously highlighted the importance of this paper in shaping European Union policies on DeFi, acknowledging the complexities associated with categorizing participants in this decentralized ecosystem, unlike traditional finance.
The push for global standards within the DeFi sector extends beyond the AMF. The Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) are actively working toward establishing regulations, with the latter set to publish recommendations by the year’s end.
Expressing support for these initiatives, the AMF seeks to engage with stakeholders from both the public and private sectors. By facilitating discussions and soliciting input, the AMF aims to develop a balanced regulatory framework that will promote the sustainable growth of decentralized finance in the long term.
The challenges of regulating DeFi protocols lie in their decentralized and disintermediated nature, making it difficult to identify specific entities for compliance purposes. While jurisdictions around the world are increasingly regulating centralized crypto exchanges, DeFi poses unique challenges due to its decentralized nature.
Notably, the AMF has already taken proactive measures to regulate cryptocurrency operations within its jurisdiction. In January 2023, the agency advocated for mandatory and expedited registration of cryptocurrency firms that lack nationwide authorization, aligning with upcoming European Union regulations set to be implemented under the Markets in Crypto Assets (MiCA) framework.
As the AMF actively engages in shaping the regulatory landscape for DeFi, it encourages industry stakeholders to contribute to the proposed discussion points outlined in the paper until September 30. By soliciting a diverse range of perspectives, the AMF aims to develop comprehensive and effective regulations that strike a balance between investor protection and innovation.
The AMF’s actions reflect France’s commitment to fostering a conducive environment for the growth of the crypto sector while ensuring the integrity and stability of the financial markets. By embracing global coordination and engaging with various stakeholders, the AMF aims to lead the way in establishing a robust regulatory framework that will shape the future of decentralized finance both within France and on the global stage.