Unboxing the WEF DeFi Policy-Maker Toolkit with Professor Kevin Werbach
BeinCrypto spoke with Kevin Werbach, Professor of Legal Studies and Business Ethics at Wharton School, about the recent release DeFi Policy-Maker Toolkit.
Decentralized Finance has had a fairly impressive year. After the DeFi summer 2020, decentralized applications (dApps) have apparently popped up everywhere.
Moreover, it has been lucrative. According to DeFi Pulse, the total blocked value (TVL) in DeFi is around $ 48 billion at the time of writing.
As this new emerging financial sector grows, governments and regulators are taking note. However, developing regulations and policies around this new sector is not easy due to its decentralized nature.
Thus, in early June 2021, the World Economic Forum published its DeFi Policy-Maker Toolkit. It aims to help policymakers understand the world of DeFi and how to tackle it.
the the toolbox is a collaboration between Wharton School and WEF. As a result, he pooled expertise to develop an understandable and effective framework.
“The DeFi Policy-Maker toolkit had been in development for about a year,” says Werbach.
“We assembled a global team of experts from governments, DeFi projects, universities, investors and traditional finance, then we conducted an in-depth development process of research, analysis, workshops and comments from external reviewers. “
More than just a preview
As the name suggests, the Toolkit is something tangible and useful. Rather than being a proposition that simply describes what DeFi is and how policymakers can understand it, it provides the tools they need to create a policy with it.
“DeFi is new and evolving rapidly. It’s hard to get around financial services without intermediaries or custodians. “
“I think most policymakers want to understand how real DeFi is, how it differs from traditional finance and what potential opportunities it creates as well as the dangers,” says Werbach.
Therefore, the toolkit includes sample questions and appendices. These help policymakers to map the DeFi landscape they need to understand.
For example, there is a background assessment tool. It helps policymakers define the main risks, assess their internal knowledge and where they might find useful information.
“The toolkit does not recommend specific policies. It is designed to help policymakers and regulators understand what DeFi is, the main risks it poses, and how to think through the policy issues that arise. “
“Our aim was to give policymakers the tools and frameworks to make good decisions about DeFi,” says Werbach.
A balancing act
For Werbach, the project presented significant challenges when developing its structure and proposals.
“DeFi is growing and evolving extremely quickly. From the start of the project until the release of the toolkit, there have been major changes and important developments.
“The other challenge was to speak in language sophisticated enough to capture the depth of DeFi activity, but clear enough for readers unfamiliar with the technology and assumptions of the digital asset world. We have tried to write a balanced report that highlighted what is exciting about DeFi, while also giving a clear picture of the risks and challenges, ”he says.
On this front, the toolkit describes five risk categories for DeFi. These are financial, technical, operational, legal and emerging.
These risk areas take into account some of the problems already observed in space. These include hacks, the flash loan crisis, DeFi executions and others.
However, these warnings should not deter policy makers by simply describing the risks. Rather, they are providing them to show how to move forward with a new industry that is not going to go away anytime soon.
“We hope that policymakers will heed our advice to systematically address DeFi starting with their main public policy objectives. We also hope that this report will demystify the DeFi phenomenon, so that they can move forward with a good understanding of the issues. “
“The toolbox is filled with worksheets and other resources that decision makers can use when analyzing DeFi issues and businesses. It is structured to be a practical resource that will help them move forward in developing appropriate policies in this area. We also hope that the toolkit will help DeFi experts and developers better understand the regulatory and public policy process, ”said Werbach.
A warm enough welcome
Just like in other parts of the crypto world, the issue of regulation can divide the community. Regulation can be seen as either a help or a hindrance, depending on the interests of the organization.
However, for Werbach, most of the toolkit project participants were happy to work with those involved.
“We found many influential members of the DeFi community eager to work with our project. There are certainly some DeFi developers who are more interested in working with regulators than others, but I think big projects recognize that if they want DeFi to become a legitimate and reliable segment of financial services, legal and regulatory issues need to be. be resolved.
A global perspective for local implementation
Of course, policy makers work in the jurisdictions in which they reside. As a result, the toolkit provides a macro consideration for those who would work at a micro level.
Therefore, it could not provide information for every country interested in using it. Rather, it is a comprehensive tool that can be used in a variety of national contexts.
Thus, a country like El Salvador, which has taken a welcome position on cryptocurrencies, especially bitcoin, will find value when considering a policy for DeFi.
At the same time, a country like the United States, which has shown itself to be more suspicious, as evidenced by the slow movement of SEC on ETF applications, can also use these tools in its more reserved context.
“The DeFi Policy-Maker Toolkit is a global report. “