These projects are evolving incredibly fast with new and interesting potential. And there are projects that show a potential for scalable increased efficiencies in transactions speed, cost, and customization. Developers have also constructed smart contracts that offer individuals the ability to invest, to lever those investments, to take a variety of derivative positions, and to move assets quickly and easily between various platforms and protocols. This movement is not about merely developing new digital asset tokens. It should also come as a surprise to no one that investing is often at the core of DeFi activity. These similarities should come as a surprise to no one, considering finance is in the name. So while the underlying technology is sometimes unfamiliar, these digital products and activities have close analogs within the SEC’s jurisdiction. national securities exchanges, and then can be traded and used in a variety of other DeFi applications. There are also tokens coded to track the prices of securities trading on registered U.S. Other applications let users earn fees in exchange for supplying liquidity or market making. In addition, there are web-based tools that help users identify, or invest in, the highest-yielding DeFi instruments and venues. Both types of products offer returns, some directly, and some indirectly by enabling the use of borrowed assets for other DeFi investing opportunities. Others offer the ability to deposit a digital asset and receive a return. There are decentralized applications, or dApps, running on blockchains, that enable people to obtain an asset or loan upon posting of collateral, much like traditional collateralized loans. Many DeFi offerings and products closely resemble products and functions in the traditional financial marketplace. Many Investments Share Important Attributes This article attempts to provide a short background on the current regulatory landscape for DeFi, the role of the United States Securities and Exchange Commission (“SEC”), and highlights two important hurdles that the community should address. These are crucial questions, and the answers are important to lawyers and non-lawyers alike. regulates the DeFi market?” and “Why are regulators involved at all?” abound. Social media questions like “who in the U.S. While the potential for profits attracts attention, sometimes overwhelming attention, there is also confusion, often significant, regarding important aspects of this emerging market. However, it also poses important risks and challenges for regulators, investors, and the financial markets. Much of DeFi activity takes place on the Ethereum blockchain, but any blockchain that supports certain types of scripting or coding can be used to develop DeFi applications and platforms.ĭeFi presents a panoply of opportunities. In general, though, it is an effort to replicate functions of our traditional finance systems through the use of blockchain-based smart contracts that are composable, interoperable, and open source. For those readers not already familiar with DeFi, unsurprisingly, definitions also vary. But what that term actually encompasses is broad and amorphous and includes everything from tokens, to non-fungible tokens, to Dexes to Decentralized Finance or DeFI. Whether in the news, social media, popular entertainment, and increasingly in people’s portfolios, crypto is now part of the vernacular. As published in The International Journal of Blockchain Law, Vol.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |