Response to the IOSCO Consultation Report on Policy Recommendations for Decentralised Finance (DeFi)

FESE welcomes the IOSCO progress on policy recommendations to address market integrity and investor protection issues in decentralised finance (De-Fi).

The response to the IOSCO Consultation Report provides several policy considerations that FESE believes are crucial to take into account when preparing international policy recommendations on De-Fi, in particular:

• FESE believes that the international De-Fi regulatory framework must maintain a technology-neutral approach. Within this approach, existing principles of “same business, same risks, same rules” should apply where possible but, at the same time, should consider De-Fi specifics as well.
• FESE agrees with the risks and issues outlined in the report, in particular with those stemming from the issue of identification of responsible parties. Meanwhile, FESE underlines that the functioning of public permissionless blockchains/DLT should be carefully analysed before applying regulation as new technological developments can also provide many benefits to the financial system.
• FESE underlines that regulated Ce-Fi institutions could provide an array of safeguards and reliability to the world of De-Fi. In this regard, activities of Ce-Fi institutions in enhancing the decentralised networks’ integrity, e.g., by contributing to the consensus mechanisms or by running nodes for the networks, should be encouraged.