The decentralised finance (DeFi) sector could face further regulation as the French Central Bank has suggested a certification process would be implemented in order to ensure better governance standards and security. This follows on from the US Treasury Department's warning that DeFi has been used as a way to raise illegal funds for North Korea.

The proposals by the ACPR, the wing of the central bank responsible for monitoring banks and insurers, sets out the possibility that those responsible for running sensitive services may need to incorporate, making them subject to supervision. To strengthen the security of smart contracts, the ACPR has proposed a certification system that would need to cover code security and governance.

Making sure that highly leveraged products are not being sold to retail investors is also a priority, as DeFi allows users access to httpsproducts that are typically restricted to traders and professionals. The Paris-based Legal High Committee for Financial Markets is due to report on the legal status of Decentralized Autonomous Organizations by the fall of 2021.

Closer to home, the EU is likely to vote on the Markets in Crypto Assets (MiCA) framework in the coming week. This regulation would impose rules on providers such as exchanges and wallet providers in a bid to secure consumer protection.

Incorporating and regulating DeFi firms looks to be the trend as more governments are focusing their attention on the increasingly popular sector. As the industry continues to grow, the framework in place could rightly help secure the sector and make sure it is operating within the boundaries of the law. It remains to be seen how the proposed changes would be received by the DeFi community as a whole but with regulation a necessity, the certification process could become commonplace.



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