As the decentralized finance (DeFi) space grows, regulators are stepping up their efforts to conduct research and provide a better understanding of the emerging industry.

The International Securities Organization (IOSCO) today released a report that aims to provide insight into DeFi and highlight some areas that may be of concern to regulators. According to the report, DeFi is on the rise and many of the mechanisms are very similar to traditional financial markets.

The total value is locked in DeFi. Source: IOSCO Report.
In addition to moving away from traditional finance, IOSCO states that many financial products, services, plans, and activities in the DeFi industry sometimes overlap with traditional financial transactions.

For this reason, IOSCO has urged regulators to understand the implications of DeFi development in relation to their jurisdiction. IOSCO notes that as the DeFi market expands, “a detailed and comprehensive understanding of the DeFi market” can improve the ability of regulators to set laws relevant to their areas.

In the report, IOSCO acknowledged that the DeFi industry has many benefits to offer. “DeFi is a new and rapidly growing area of ​​financial services,” said Ashley Alder, president of the International Organization of Securities Commissions (IOSCO). However, the organization also noted the risks it poses to users as the industry evolves. Adler described the report as an overview of IOSCO’s “key areas”.

Along with the report, IOSCO formed a task force to cover the DeFi market. Tuang Li Lim, leader of the newly formed working group, stated the following:

“IOSCO’s decision to establish a working group demonstrates the determination of our members to take coordinated and timely policy action to address the risks posed in this rapidly growing region.”
RELATED: DeFi To Achieve Mass Adoption Through Institutional Participation, DEX Founder Says

Meanwhile, a report by KuCoin Labs published in February suggests that DeFi players may choose to control DAOs as an approach to regulatory risk. The report states that DAOs may be recognized as legal entities, however, community interests may take precedence.

Source: CoinTelegraph