The EU’s executive arm, the European Commission, has put out a call to study Decentralized Finance (DeFi) activity on the Ethereum blockchain. The news came to light through a document published by the Commission last week.
The Commission’s pilot study aims to “develop, deploy, and test” a built-in technology to monitor activities on a real-time basis within the DeFi space. It will also assess the need for regulatory measures. For this, researchers involved will collect automated supervisory data directly from the Ethereum blockchain and track it on a real-time basis.
The study comes at a time when the DeFi space is growing in popularity but has been afflicted by many hacks and exploits. Crypto exchange Binance recently joined the long and growing list of blockchains hit by an attack this year. Yet, despite how common exploits have become, DeFi continues to be touted as a good replacement for traditional banks and financial institutions. And the fact that regulatory authorities have little control over the DeFi realm does not help.
The EU has been closely monitoring the development of the crypto market for some time now. Recently, on 5 October, the EU also sealed the text of its landmark crypto laws, Markets in Crypto Asset Regulation (MiCA) and a law regulating fund transfer.
MiCA is meant to help governments uncover the identity of those making crypto payments. Introducing the first-ever licensing regime, the law applies to EU crypto wallet holders and crypto exchange users. It also regulates reserves related to stablecoins, with a view to avoiding Terra-LUNA-like crashes.
In fact, even in June this year, the EU announced new rules meant to combat money laundering via crypto assets.
The recently launched pilot study, therefore, seems to have been a long time in the making and also long due. It is estimated to take around 15 months to complete and could cost 250,000 euros.