Peter Kerstens, the original European Commission architect of Europe’s MiCA regulations for cryptocurrency, said he doesn’t see the need for MiCAR 2, and it’s mainly the European Central Bank that wants it. He believes that regulating decentralized finance (DeFi) would be tricky, short of a ban, which he would never advocate in a democracy. He also pointed the finger at US banking regulators as the instigators of the Basel banking rules that have limited the involvement of banks in permissionless blockchains to date. Mr Kerstens was talking during the EY Blockchain Summit.
MiCAR included a clause that required a report to be delivered 18 months after the regulations came into force. It is meant to cover decentralized finance (DeFi), crypto borrowing and lending, NFTs, and certain stablecoin related services. It became clear during his talk that Mr Kerstens is tasked with writing the report.
Most regulations start with a problem. But not every problem can be solved with regulation. Mr Kerstens discussed decentralized finance, noting that the vast majority of DeFi uses decentralized technologies but has counterparties, and hence is not truly decentralized. But true decentralization, without human counterparties, is possible. “It’s fairly niche, but it exists,” he observed.
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