August 9, 2022

WEF pushes for restricting “certain types of actors and transactions” from using decentralized finance

Kicking people out of the financial system.

Like the response to trucker protests in Canada demonstrated previously in the year, a central and tightly controlled monetary system  makes it very easy to punish those participating.

On a much bigger range, the same is true of entire nations – if they are dependent exclusively on centralized international systems, they can be cut off at any point, and the ones in control of the systems can use them as very effective weaponry.

But the rise of decentralized finance (DeFi) is throwing a wrench into all this, the World Financial Forum (WEF) has noted  in an article submitted on its site . The WEF is phoning the technology behind DeFi “ something of a double-edged sword. ” The case associated with Russia is being used for instance and perhaps a smokescreen, that emerges the old push to manage decentralized finances as such.

From the point of view of those developing and using DeFi, matters are much more simple: the goal is to remove third parties and ensure financial sovereignty.

Nevertheless , that also means the decentralized system can be used as safety against various forms of punishment – at the level of a single individual, all the way to the highest-stakes geopolitics. And the decentralized program seems to scale well throughout this huge playing field.

This is what the particular WEF is worried about: how to make sanctions designed to cripple economies of adversaries effective once again, in the era of DeFi?

The article – penned by R3’s Alisa DiCaprio – is offered as a “ thought experiment” – but the WEF once again appears eager to give alone a leading role in guiding the direction of regulation of emerging technologies.

DiCaprio notes that while there was great hope the fact that removal of Russian banks through SWIFT would make anti-Russia sanctions much more efficient, which has not been the case. The reason is that the system of authenticated communications exchange is not centralized. Whilst SWIFT is a major player – it isn’t the only one. So the affected banks have been in a position to continue to transact.

DiCaprio suggests that regulating blockchain – which is at the heart associated with decentralized finance – will be the right way of gaining control of decentralized networks.

“ A future framework must consider how this important activity (the ability associated with third parties like SWIFT to intercept payments) might be replicated for blockchain based value transfers, ” The future actor writes.

“ Regulators across the board are usually subsequently fast-tracking regulation on cryptocurrencies to tackle precisely these problems. ”

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