Last month’s proposal from Sam Bankman-Fried, CEO of crypto exchange FTX, for regulators to establish a litany of standards for the cryptocurrency industry poses an existential threat to decentralized finance (DeFi) platforms and entrepreneurial spirit. As one of a select few with the capital and clout to move the needle in the discussion surrounding crypto regulation, Bankman-Fried, also known as SBF, should be taking a stand to protect DeFi by directing regulators to where they’re urgently needed: centralized finance (CeFi) platforms and centralized exchanges (CEXs).
In a section of his blueprint for regulatory oversight and industry standards addressing DeFi, SBF affirms the importance of maintaining permissionless smart contracts and validators. He goes on to propose that DeFi front-end providers, website hosts and even related marketers be required to register as traditional financial brokerages.
The implication of such a classification would subject DeFi agents to a host of stringent regulatory policies and Know Your Customer procedures. Even hiring the highly specialized professionals necessary to manage relevant legal responsibilities requires enormous capital and resources.
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