World Economic Forum report calls for tailored DeFi regulation to mitigate risks and protect consumers

The World Economic Forum (WEF) has called for stricter licensing measures and “clear sandbox objectives and support mechanisms” to address the challenges posed by the DeFi industry. In its October report titled “Regulation of Digital Assets: Insights from Jurisdictional Approaches,” the WEF stressed the need for greater international cooperation and “technology-enabled” solutions to effectively regulate the digital asset industry. The report examined the regulatory landscape in nine jurisdictions and made recommendations for policymakers, regulators, and private sector leaders. According to the report, a sandbox-first approach, tailored licensing models, prioritizing risk mitigation, and transparency are essential for DeFi. The report notes that DeFi applications vary widely in their use cases and associated risks. Some DeFi platforms may provide access to social media protocols, while others may facilitate decentralized identity management systems. These different applications require different regulatory approaches to ensure appropriate risk mitigation. The report also recommends that regulators should provide clear and consistent communication on the risks involved in using specific DeFi applications and protocols. This includes informing users of the potential losses that may occur when interacting with platforms that custody user funds or involve financial considerations. In addition, regulators should emphasize the nascent nature of many DeFi participants and the potential risks of investing in this emerging ecosystem, and also emphasize the importance of strengthening international cooperation on anti-money laundering (AML) and KYC policies. (Cryptonews)