Blockchain Experts #1: DeFi Financial Supervision. Back to basics: trustworthiness & consumer protection (M. Hardy, OSOM Finance)
At their core most organisations supervising financial markets have, first and foremost, the mission of protecting consumers and ensuring the financial products offered to their citizens are trustworthy. This is much more central to their mission than fighting money laundering, terrorism or fiscal evasion.
Up until now, this has meant acting as gatekeepers between those that offer services and those who contract them. In broad terms, the deal was that should service providers do a bad job or do so without having asked for a license first they would be fined or go to jail. The humans were easy to find because they lived somewhere and had local bank accounts. And sending them to jail would end the provision of service. Meatspace problems had meatspace solutions.
In today’s world, once a smart contract is deployed, it is unalterable. Sending to jail the human who created it will do nothing to end the offense, the smart-contract will keep running. It’s like trying to fight ideas. The only way to stop operations would be to shut off access to the internet. Metaverse problems need metaverse solutions.
So what could metaverse native solutions be? Financial supervisors could start auditing smart contracts and offer “blue ticks” when they have verified that the smart contracts do what they advertise they do, and big warnings when they don’t, and offer consumers education on Decentralised Finance. In a decentralised world where it’s no longer possible to be gatekeepers, financial supervisors might find a new life as curators, and collectively we can move from a setup made for a very “yellow” or “orange” world to a “green” or “teal” type of setup. Maybe they can set up a DAO for that.
Blockchain Experts is a monthly series, where Blockchain for Europe's members and advisors share their insights on the world of blockchain, DLT and crypto. Follow our Twitter for future posts!