Based on Cubans, Novogratz says that DeFi should “play by the rules” or “pay players”
Decentralized Finance (DeFi) emerged as one of the fastest growing trends in the crypto space in 2021, and as DeFi’s unique capabilities take hold in finance when protocols do not take steps to self-regulate.
On June 23, Galaxy Digital CEO Mike Novogratz warned that DeFi protocols will soon have to decide whether to combine your customers and anti-money laundering processes in order to be approved by the authorities. “
I think the big DEFI protocols have to decide whether to play by the rules most countries ask of them (KYC / AML) or to slap the middle finger with it. Invest in a compliance class now or pay for the Piper later.
– Mike Novogratz (@novogratz) June 23, 2021
On June 17th, billionaire investor and DeFi advocate Mark Cuban called for stablecoin regulation after losing money during Iron Finance’s “banking” era, highlighting the demand for daily regulation in the Wild West world, viz DeFi.
In the next few tweets, Novogratz explained his position, warning that governments have developed tools to respond to this growing threat and that it would be wise to work with them to ensure the long-term success of the ecosystem.
“It is unwise to believe that governments have no tools in their toolbox to crack down on the bad guys … they do. If we want this ecosystem to thrive, we have to recognize that we have to operate within the rules set by society. “
While the idea of adding DeFi KYC and AML functionality goes against the anonymous and decentralized ethos enjoyed by many in the crypto community, given the number of users it might be worth considering. DeFi is on the rise and fraud projects are on the rise across multiple protocols.
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Data from Glassnode shows that while the DeFi user base continues to grow, recent monthly increases have slowed, from a 25% increase in May to an 18% increase in April.
When new users join the ecosystem, it is important that they have a positive first experience so that they can continue to interact with DeFi protocols and be able to regulate and accountability can help. .
Speaking of user concerns about privacy, Novogratz says the latest protocol upgrades are in development that could make privacy and compliance a real possibility.
“No-knowledge compliance and other systems need to be developed in order for DeFi to scale. I am sure they will. “