Regulation and Transparency

Regulation and transparency

One area that is likely to witness profound change is regulation. In 2023, the crypto industry regularly found itself at odds with United States lawmakers keen to impose themselves on the crypto industry. DeFi is unlikely to avoid scrutiny in the year ahead.
Nathan Catania, partner at XReg Consulting — a public policy and regulatory affairs consultancy specializing in crypto — told Cointelegraph that true DeFi has far less to fear than centralized alternatives.
“The majority of DeFi projects have certain elements of centralized control and are, in fact, hybrid finance (HyFi), meaning they exist somewhere on the spectrum between CeFi [centralized finance] and DeFi,” explained Catania. “In 2024, true DeFi will continue to remain outside of the regulatory perimeter, as it cannot be regulated under existing regulatory paradigms. However, it will be the year that regulators in many jurisdictions, including the U.S., will crack down on HyFi.”
Antoni Zolciak, co-founder of Aleph Zero — a privacy-enhancing layer 1 — also believes 2024 will be an important year for regulation.
“As institutional capital signals its entry into crypto markets through ETF [exchange-traded fund] discussions, tokenization of assets and major Web3 launches, DeFi’s readiness is in the spotlight. In 2024, major market trends in DeFi will center on addressing institutional concerns and fostering compatibility with regulatory frameworks. The industry recognizes the challenges posed by features like permissionless markets and pseudonymity, prompting a pivotal shift toward a nuanced balance between privacy and transparency through proactive compliance measures.”
Speaking to Cointelegraph, Zolciack went on to add, “The focus on transparency and compliance is reshaping DeFi’s trajectory [...] Critical solutions are already emerging to tackle institutional concerns. On-chain intellectual property protection, real-time AML [Anti-Money Laundering] analytics and decentralized order book exchanges signify a move toward safeguarding proprietary trading strategies.”