Vitalik Buterin Speaks Out on DeFi Legal Issues
Ethereum founder Vitalik Buterin has weighed in on the ongoing debates surrounding DeFi regulation, a topic that has sparked considerable controversy recently.
Vitalik Buterin Addresses DeFi Legal Issues
Amid discussions about regulatory frameworks to oversee the DeFi sector, Vitalik Buterin, one of the most influential figures in the crypto space, has shared his personal views on the matter.
Should I publicly blab my opinions about crypto regulation more? Feels unfair to let other people get attacked by CT but never actually poke my own head out.
— vitalik.eth (@VitalikButerin) October 30, 2022
Vitalik believes that if regulations are to be imposed, they should serve only two primary purposes:
- Protecting investors
- Making it harder for bad actors to steal funds
He also outlined three measures that the crypto industry could take to address current criticisms:
- Impose leverage limits on DeFi trading
- Require transparency in security audits of protocols
- Assess user knowledge before granting access to complex DeFi products
Buterin argues that current crypto regulatory proposals are unlikely to be effective. For instance, implementing KYC (Know Your Customer) regulations for DeFi users might deter legitimate users without significantly hindering hackers. He points out that malicious actors typically interact directly with the smart contracts of DeFi projects to execute attacks, rather than through the project’s front-end interface, rendering KYC barriers ineffective. He suggests that KYC regulations should be applied primarily to centralized exchanges (CEXs).
Vitalik further comments that the crypto market needs more time to mature before it can be widely adopted, as stricter regulations from various governments are likely to come into play. He believes that the repeated rejections of crypto ETF proposals will give the market additional time to develop. As he puts it:
“Especially at this point, having regulations that allow the crypto sector to operate freely internally but remain difficult for the public to access is better than intrusive regulations directly targeting projects.”
Buterin’s remarks come in the wake of heated debates in the crypto community regarding regulatory proposals put forth by FTX CEO Sam Bankman-Fried, which include surprising calls for projects to comply with U.S. sanctions and requiring KYC for DeFi users.
