Anderson McCutcheon, CEO of Chains.com, gives his opinion on DeFi and its absence in the regulatory framework.

Decentralized Finance (DeFi) is a solution based on Blockchain technology, which refers to peer-to-peer financial services, running on a public Blockchain like Ethereum, without intermediaries, and running through smart contracts.

There is an increasing interest in cryptocurrencies and Decentralized Finance, which has allowed their unstoppable advance in the financial market. An example of the progress of this disruptive technology is the fact that “users can interact with financial products” and, very particularly, “generate programmable money instead of products.”

Anderson McCutcheon, Founder and CEO of Chains.com, believes that DeFi currently operates outside of a regulatory environment, relative to other disruptive developments that have occurred in other ecosystems, and that it has “forever changed the way financial systems are designed.”

In addition, the expert states that cryptocurrencies are under the spotlight by regulators, setting their sights on anonymous digital currency transactions, while “FinCen” regulations focus on non-custodial hard wallets.

The current infrastructure bill approved a few months ago by the United States Senate includes a section that deals with cryptocurrencies and the transactions that take place with them. Likewise, there is the proposal for a payment license for anyone who wants to have a stake in a network, including managing activities or establishing a node.

McCutcheon also considers that the new proposals of the bill add difficulties to the sector and support the entities that can obtain the license. This leads to the promotion of “centralization in an industry built around decentralization”, alienating occasional investors and unwilling to profit from the industry with such high commissions.

Specifically, McCutcheon indirectly promotes a non-decentralized industry, despite this being the purpose of its creation.

DeFi Evolution

Since its inception, its very name says “Decentralized Finance”, the creation of the sector was so that there would be no type of intermediary between the user and the product other than the Blockchain network through which the operation is carried out.

This execution mode is the same one that allowed anonymity to exist within DeFi from the beginning, according to McCutcheon “the deadly sin was that there was no one to hold responsible for the failure or success of these projects.” However, he stated that DeFi is still more “transparent” than CeFi.

However, just as it allows the presence of anonymity, it also opens doors and even makes it easier for the scammer or attacker to carry out their fraudulent acts without having someone to hold responsible.

Regulatory Framework for Cryptocurrencies

In McCutcheon’s opinion, the fact that many of the existing digital assets are traceable gives way to “each centralized entity being able to comply with the regulatory infrastructure of each jurisdiction in which it operates.”

Thus, according to the above, the fact that they are traceable puts some pressure on the holders of cryptocurrencies to keep up to date with respect to tax matters. The example discussed by the expert was the payment of taxes on cryptocurrencies.

McCutcheon said that, “If a cryptocurrency participant fails to pay their taxes, the IRS does not hesitate to take action by sending the necessary letters to crypto holders, advising them that they have an obligation to bring their tax obligations up to date.”

McCutcheon concluded that, “The closer we get to a clear and robust framework, the closer we will be to creating a more transparent space that offers more value to retail participants.”

By Audy Castaneda

Results from ECB focus groups indicate that the public is more likely to embrace a digital euro that physical and online stores accept, and that allows for easy person-to-person payments.

Fabio Panetta, a member of the Executive Committee of the European Central Bank, said that discussion groups exploring the possible deployment of a digital euro hinted that the ability to use the digital currency in physical stores and online could be a key feature.

In a written statement published on Wednesday, Panetta outlined the conclusions of the ECB’s focus groups on digital payment methods commissioned in September 2021, which suggested that people were more likely to accept a digital euro than one accepted in physical and online shops, and that would allow easy person-to-person payments. According to Panetta, all businesses would have to accept a digital euro to see adoption trends like those experienced by the fiat euro 20 years ago.

Panetta Explains

“The introduction of euro notes made it possible to pay with physical euros anywhere in the Eurozone,” Panetta said. “So it’s no wonder people expect to be able to use the digital add-on to tickets anywhere they can pay digitally or online.”

On Twitter, the ECB posted that, “A digital euro can only be successful if it meets the payment needs of Europeans, says Executive Board member Fabio Panetta. Focus groups have provided us with key input for the project.”

The results of the focus groups also indicated that many citizens and merchants were not familiar with the digital euro and feared that cash would disappear, as the number of use cases for this technology increased. However, once they understand the concept, members of the general public focus group said that the most desirable feature for a digital euro was that it be “widely accepted in all types of physical and online stores”, while traders suggested high demand would be its biggest driver.

Panetta added that the ECB would consider these features along with privacy concerns in response to a public consultation the central bank conducted between October 2020 and January 2021. He said the ECB would hold another round of focus groups including the digital euro by the end of 2022, providing useful data to determine relevant policies.

Panetta further explained that, “We are getting a clearer picture of what citizens and merchants want, so that we can fine-tune all the design features of a digital euro before any possible issuance. In addition, the co-legislators have a key role to play, for example in enabling a more privacy.”

CBDC: ECB and Other Countries

The European Central Bank has been exploring the development of a digital euro, as interest in central bank digital currencies appears to be growing around the world. The Central Bank of the Bahamas was the first nation to launch a CBDC in October 2020. China began testing its digital yuan in 2020, subsequently making it available to international athletes at the Beijing Winter Olympics in February.

By Audy Castaneda