Central Bank of France Looks to Regulate the DeFi Space, New Metaverse Rules Proposed
On Tuesday, April, France’s central bank - Banque de France - shared its part of the discussion on the regulation of the European crypto asset while laying a clear emphasis on the regulation of decentralized finance (DeFi) market along with the potential approaches to its regulation.
The discussion comes at a time of growing use of tokenization in finance along with the introduction of blockchain technology in several economic sectors.
Written by members of the Fintech-Innovation Hub at the French central bank’s Prudential Supervision and Resolution Authority, the authors of the paper said that the term “DeFi” refers to a wide range of crypto services, technologies, and associated risks.
The paper added that the current regulations are not enough to address all things together. “The main idea developed in this paper is that the regulation of disintermediated finance cannot simply replicate the systems that currently govern traditional finance,” the authors wrote.
The experts proposed regulation through certification that will strengthen decentralized autonomous organizations (DAOs), blockchain infrastructure security. They add that the European Union’s Markets in Crypto-Assets (MiCA) regulation completely excludes fully decentralized services from its scope. Thus, to extend the scope to DeFi intermediaries, they would need to redefine “crypto asset service providers”.
The paper notes that the blockchain code could be subject to minimum standards wherein a private blockchain will have the advantage of selecting trusted players, however, it will require a more specific regulatory framework.
The paper adds that also the code in the smart contracts will be subject to different certifications via several different mechanisms. Also, the French central bank proposes stablecoin regulations in order to complement the DeFi regulation. This is complicated in the MiCA regulations as it “does not apply to services provided in a fully decentralized manner without any intermediary.”
In another news, the French Economy Ministry published a consultation paper stating that it wants to stop the dominance of international internet giants in the metaverse. Emmanuel Macron's government is currently soliciting feedback on policy matters, including privacy, health, and environmental risks of virtual worlds. The aim is to establish "digital sovereignty" for Europe.
The consultation paper that is open until May 2 notes: "The immersive virtual worlds of tomorrow can take many forms. The goal is to "propose an alternative to the virtual online worlds today put forward by international giants.”
During last year’s election campaign, Emanuel Macron also spoke of the need to build a European Metaverse.