German BaFin official calls for 'innovative' EU-wide DeFi regulation.

Birgit Rodolphe, an Executive Director at the German Federal Financial Supervisory Authority (BaFin), has made a demand for creative and uniform regulation of the Decentralized Financial Area (defi regulation) throughout the whole of the European Union (EU).


BaFin is a German financial regulatory organization responsible for regulating a wide variety of financial institutions, including cryptocurrency firms. These institutions include banks, insurance companies, and financial institutions. A "crypto custody license" is a license that is necessary for businesses that desire to offer cryptocurrency services in Germany. BaFin is the organization that issues these licenses.


Rodolphe issued a warning to customers about the dangers posed by the uncontrolled realm of decentralized finance in an essay that was published on the website of BaFin. He also demanded that EU member states adopt common regulatory measures.


The executive director of BaFin's money laundering processing and prevention division is a woman named Birgit Rodolphe.


"If there is one obvious thing, it is that the clock is ticking. The longer essential products with systemic implications are allowed to stay unregulated in the defi regulation market, the higher the risk to consumers, and the greater the potential that critical offerings may settle.


She claimed that defi crypto is not as "democratic and altruistic" as its supporters say and that its products are "difficult for many to understand." She cited risks to consumers from "technical problems, hacks, and fraudulent activity" that have seen millions lost. She also claimed that decentralized finance regulation products are "difficult to understand."


" She concluded that the fact that crypto and defi protocols use new technology does not make them exempt from having to comply with rules.


She went on to say that loans, insurance, and other products that are not a part of the traditional financial system are subject to licensing and supervision wherever they are offered. She urged the authorities in charge of financial regulation to enact rules that will give providers of decentralized financial services legal clarity.


Rodolphe highlighted BaFin's "crypto custody business" license as an example of a regulatory framework that is "appealing" to crypto enterprises. This license will be implemented in January 2020.


The license enables businesses to provide cryptographic services inside the German market. Just four suppliers have been approved, even though many other financial institutions have applied. In his writing, Rodolphe argued that the regulatory frameworks of the various nations in Europe need to be the same:


"Such standards would ideally be universal across the EU, of course, to prevent a fragmented market and to harness Europe's full innovative potential,"


Germany climbed to the top of the list as the most "crypto-friendly" nation in the first three months of 2022 due to its policy of not levying taxes on long-term capital gains from cryptocurrency investments. A survey conducted in March 2022 indicated that over half of the population in Germany is considering making financial investments in cryptocurrencies.


In 2021, Germany's cryptocurrency regulation also made several moves addressing cryptocurrencies, including enacting legislative amendments to welcome blockchain technology and strengthening restrictions for cryptocurrency businesses. During the trial of a digital currency controlled by the European Central Bank, the country's central bank took the primary role.


Rodolphe concluded that new laws for DeFi must be less stringent than the currently in place requirements for conventional financial goods. This is because this might make the pursuit of DeFi products by corporations more appealing from a regulatory perspective


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