Is regulation possible in a completely decentralized environment?
Mumbai, Maharashtra [India]: As such Crypto, Industry is on firing range from almost all the regulators across the globe. When it comes to Defi, the following are the legal & regulatory risk –
Enforceability & Legal Provisioning – understanding the legal nature of Digital or Crypto Asset, legal enforceability of smart contracts, and the parties to which legal liability will attach is itself a big challenge.
Dispute resolution –The potential multi-jurisdictional issues associated with resolving disputes that may arise between users and / or between users and the developers of a DeFidApp.
Data privacy – Data protection compliance in relation to the collection and storage of personal data and ensuring compliance with applicable data privacy laws.
AML –Anti-money laundering (AML) and know-your-customer (KYC) is the most important aspect in crypto space, DeFi is in regulatory and commercial risk.
IPR – dApps being developed do not infringe the intellectual property rights of others and potentially taking steps to entrench value in dApps developed through the protection of intellectual property rights in them.
Consumer Right – Consumer is King but in case of DeFi, it’s a matter of concern as well.
Regulatory frameworks/securities laws – analysis as to the applicable regulatory frameworks and securities laws that may apply to any digital tokens issued as part of the operation of a dApp, transactions taking place in relation to crypto-assets via a dApp, and/or the nature of activities being undertaken through the dApp will need to be fully understood.
Tax – What kind of Tax applicable to DeFidApp users for Personal tax consideration & What kind of tax applicable for Issuance of any digitized tokens is also a matter of confusion.
There is always a fear that global regulators could turn their eyes to DeFi as it grows in scale. Regulators will definitely use address checking services in order to blacklist certain users.
Any which ways conversion to Fiat from crypto at some point needs centralized exchange & then Financial Action Task Force (FATF) regulations come into play, which includes the ‘Travel Rule’ which requires Virtual Asset Service Providers (VASPs) to collect and transfer customer information during transactions.
When things will end up using Centralized exchange then DeFi protocols may be forced to adopt KYC and other regulations. In the name of “Trust Wallet”, most of the Ponzi operators running their MLM scheme in the model of “helping plan”, which means keep on introducing people & huge money rotation is on across the board.
More Info: https://finlaw.in/crypto-lawyer/, https://blog.finlaw.in/
