The decentralized economy (DeFi) emerged in 2021 as one of the fastest growing trends in the cryptocurrency sector, and as the unique features of DeFi begin to dominate the traditional economy, traditional and crypto business leaders are warning that regulation could include. Method if protocols fail to take steps toward self-regulation.

On June 23, Mike Novogratz, CEO of Galaxy Digital, warned that DeFi protocols will soon decide whether to include measures for your customer and money laundering to obtain government approval or a “whistle payment later.” ”

On June 17, billionaire investor and DeFi spokesperson Mark Cuban called for stablecoin regulation after losing money in Iron Finance’s banking jets, highlighting the growing demands for regulation in the world of the Wild West.

In several subsequent tweets, Novogratz outlined his position and warned that governments have developed tools to deal with this growing threat, and that it would be wise to work with regulators for the long-term success of the ecosystem.

Novogratz SA:

“It is unreasonable to think that governments do not have the tools in their arsenal to hunt down the bad guys…they do. If we want this ecosystem to grow, we must realize that we must act within the rules set by society.”
While the idea of ​​adding KYC and AML functionality to DeFi goes against the ethos of anonymity and decentralization espoused by many in the crypto community, it might be worth considering the increase in DeFi users and the spread of fake projects across many protocols.

On the topic: Beware of ‘soft blankets’ – a growing threat in a decentralized economy.

Glassnode data shows that while the DeFi user base continues to grow, earnings have declined month-to-month recently, from 25% growth in May and 18% in April. June is currently approaching 12%.

2021 Growth in the number of DeFi users. Source: Glassnode
As new users enter the ecosystem, it is important for them to have a positive first experience to be willing to continue interacting with DeFi protocols, and regulation and accountability can help.

Regarding users’ privacy concerns, Novogratz said the latest cutting-edge protocol updates could make privacy and compliance a real possibility.

Novogratz SA:

“Scaling up DeFi requires the development of zero-compliance systems and other systems. I’m sure it will be that way.”

Source: CoinTelegraph