Crypto executives briefed the United States Commodities Regulator, the CFTC, on key issues affecting decentralized finance (DeFi) on March 22 in Washington D.C. The CFTC’s Technology Advisory Committee (TAC) received presentations covering critical issues impacting the DeFi space, including exploits, decentralization, and digital identities.
Ari Redbord, Head of Legal and Government Affairs at TRM Labs, explained DeFi and blockchain technology, emphasizing their transparency, immutability, and privacy. He also highlighted the benefits and issues currently facing decentralization. Redbord said, “We’ve reached a point in time where we can no longer ignore decentralization. Not only do we have to embrace it, but I think it’s our duty to lead it in the right direction.”
Carole House, Executive in Residence of Terranet Ventures, and Jill Gunter, Chief Strategy Officer of Espresso Systems, provided an overview of the current solutions for digital identity and non-custodial wallets, using Ethereum Name Service and MetaMask wallet as examples.
Fireblocks founder Michael Shaulov and Trail of Bits founder Dan Guido presented the exploits and vulnerabilities that have, and continue to, take place in the market. Guido remarked that “All the hacks, they are extraordinarily public, and it’s usually your users and other outside firms that find out about them before you do,” which he said instills a “need for perfection” in crypto firms.
The meeting ended with members unanimously voting for creating a Digital Assets and Blockchain Technology Subcommittee. The subcommittee will focus on the “why of DeFi,” what problems it solves, use cases, vulnerabilities, and proposed legal and policy frameworks.
Speaking at the meeting, CFTC commissioner Christy Goldsmith Romero emphasized the importance of understanding DeFi as “policy decisions related to DeFi” are currently being made by regulators and lawmakers. Redbord highlighted the total value that entered DeFi in the last two years, saying it was “stress tested during FTX […] and did not fail. DeFi is absolutely here to stay.”
DeFi’s total value locked is around $49.1 billion, according to DefiLlama, rising from around $15 billion at the beginning of January 2021. Throughout 2022, the top 10 exploits in crypto alone saw over $2 billion lost, with DeFi on the receiving end of 113 exploits out of the 167 carried out across the year.
The creation of the subcommittee reflects the increasing recognition of the DeFi space’s significance and the need for appropriate regulatory and policy frameworks to govern it. With more institutions and retail investors entering the DeFi space, it is essential to ensure that it continues to grow sustainably and securely.