Challenges and Approaches to Regulating Decentralized Finance
Article
Salami, I. 2021. Challenges and Approaches to Regulating Decentralized Finance. AJIL Unbound. 115, pp. 425-429. https://doi.org/10.1017/aju.2021.66
Authors | Salami, I. |
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Abstract | Decentralized finance (DeFi) is an ecosystem of financial applications that are built on top of blockchain networks. DeFi aims to create an open-source, permissionless, and transparent financial system that operates without any central authority. Instead, a smart contract—which is a self-executing contract with the terms of the agreement between transacting parties written into lines of code—replaces financial institutions in the transaction. As a result, DeFi is available to everyone with reliable access to electricity and Internet connectivity. It also serves as a form of non-custodial finance since users maintain full control of their assets and transact through smart contract programs that facilitate peer-to-peer interactions. While DeFi presents huge opportunities, it also poses significant risks to traditional finance ecosystems, including the use of stablecoins and the absence of a know-your-customer framework. This essay argues that for DeFi to secure credibility, it needs to be adequately regulated in a way that aligns with how the technology works. |
Journal | AJIL Unbound |
Journal citation | 115, pp. 425-429 |
ISSN | 2398-7723 |
Year | 2021 |
Publisher | Cambridge University Press for The American Society of International Law |
Publisher's version | License File Access Level Anyone |
Digital Object Identifier (DOI) | https://doi.org/10.1017/aju.2021.66 |
Publication dates | |
Online | 06 Dec 2021 |
Publication process dates | |
Deposited | 13 Dec 2021 |
Copyright holder | © Iwa Salami 2021 |
https://repository.uel.ac.uk/item/8q0wv
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challenges-and-approaches-to-regulating-decentralized-finance.pdf | ||
License: CC BY 4.0 | ||
File access level: Anyone |
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