DeFi

DeFi regulation is the solution to scams in the sector

SEC Commissioner Hester Peirce has asked the DeFi sector to be receptive to regulations

SEC Commissioner, Hester Peirce, has strongly advocated for the adoption of regulations in the DeFi space while speaking at the George Washington University Law School on Monday.

The commissioner argued that regulating the sector will help make the competition between centralised and decentralised finance a more even playing-field. Still, she admitted the latter had the upper hand in technological resilience, ease of access, democracy, and speed of transactions.

During the speech entitled ‘Atomic Trading’ at the school event, Peirce said the sector needed to be open to these regulations. Her remarks come just a few months after she revealed the commission would take a hands-on approach to regulating  DeFi.

DeFi stormed the finance landscape at a time when most other markets were dull. The sector capitalised on this and exploded in the first few months of the pandemic. It currently boasts a total value locked of $38 billion, according to DeFi Pulse.

However, its rising popularity has seen malicious actors and foul players get in on the action. There has been an increase in the number of scams recorded in the sector since Q3 of 2020. Most of these scams often end up costing investors who incur massive losses. This is another reason why Peirce is championing for regulation within the sector.

The SEC commissioner reckons that the lack of proper regulation is the underlying and fundamental cause of all the scams. This postulation is backed by other regulators who are on the same mind that regulating the sector will also welcome new users and contribute to mass adoption.

Even as the debate on DeFi regulation goes on, the SEC commissioner understands it would not be a straightforward exercise. Peirce previously stated that the decentralised nature of the DeFi sector makes it difficult for regulation. She explained it would be an onerous task to oversee the space as that there were many grey areas to consider.

Nonetheless, Peirce believes the SEC is ready to deal with the matter. She referenced the GameStop saga stating that the commission had to make tough calls. Peirce added that DeFi would be the definitive test of the commission’s regulation capabilities. She also acknowledged the sector’s technological progress, saying the advancements would help overcome regulatory challenges.

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