The Autorité des Marchés Financiers (AMF) has emphasized the importance of applying the principle of “same activities, same risks, same regulation” to the regulation of decentralized finance (DeFi). In a discussion paper published on June 19, the French markets regulator acknowledged that DeFi presents greater risks compared to the traditional financial sector. To address these risks, the AMF called for measures to combat money laundering and terrorist financing, as well as the implementation of know-your-customer (KYC) procedures, considering the prevalent use of pseudonyms in DeFi transactions.
Given the cross-border nature of DeFi activities, the AMF emphasized the need for global cooperation in regulatory efforts. The regulator expressed its support for a globally coordinated approach to regulation, aiming to establish a level playing field and protect investors while fostering innovation. The Financial Stability Board and international securities regulator IOSCO are already working on determining the path to regulate DeFi, with recommendations expected to be published by the end of 2023. The AMF endorsed these initiatives, recognizing their significance in creating a balanced regulatory framework.
The AMF, responsible for granting licenses to crypto firms in France, underscored the requirement for a clear framework with safeguards for DeFi protocols. Recent market incidents, such as the Terra-Luna crash, have highlighted the lack of clarity in space. The AMF stated that DeFi legislation should be developed progressively and proportionately, considering the potential benefits and risks to users. The regulator acknowledged that the coming years will be crucial and challenging for the DeFi sector, as it strives for transparent and secure growth while providing adequate levels of investor protection.
