Decentralised Finance – Principles for building a robust digital economy

AFME has published a white paper discussing principles for building a robust digital economy in DeFi. AFME emphasizes the importance of developing a foundational taxonomy classification mechanism for DeFi and digital assets, encouraging further research and global cooperation to determine appropriate regulatory solutions. They highlight the need to leverage existing processes and frameworks to create a holistic regulatory perimeter and provide recommendations, including requiring authorization for regulated financial activities, establishing an appropriate accountability structure, adopting a risk-based approach to DeFi, and promoting consistent regulation across varying levels of centralization.
AFME acknowledges the evolving nature of the market and states that the white paper is not a definitive solution but rather a foundational piece to explore technical issues and propose initial regulatory approaches. They aim to initiate discussions across the industry and continue working on innovative policy solutions for DeFi, considering upcoming regulations like the RTS for the MiCA Regulation and eventually MiCA 2.
The paper also outlines various use cases and potential impacts of DeFi, such as tokenized real-world assets, decentralized lending, decentralized exchanges, and the role of NFTs in areas like ticketing, authentication, and supply chain financing. AFME emphasizes the need for industry and regulators to collaborate in developing comprehensive solutions for DeFi while minimizing regulatory arbitrage and ensuring a level playing field.