Decentralized Finance regulation to foster competition and economic growth
DOI:
https://doi.org/10.24275/uam/azc/dcsh/ae/2023v38n98/LealKeywords:
DeFi, Finance, Antitrust, BlockchainAbstract
In order to make public policy recommendations to efficiently regulate Decentralized Finance (DeFi), we conducted an exploratory study examining the state of the art, organizing the public debate and analyzing real-world applications of this cutting-edge technology. We found that DeFi has the potential to increase efficiency in financial markets, promote competition, improve access to capital and contribute to economic growth. For all its potential benefits, however, the technology also presents substantial challenges in the form of user accessibility, market stability, fair competition and law enforcement. Growth of the emerging DeFi market depends on successfully addressing the concerns of investors, consumers and authorities without simultaneously regulating the technology into inefficiency and disuse. Taking into account the implications of DeFi for antitrust policies and economic growth, we explore the applicability of a balanced embedded-regulation, which holds promise as a bridge between innovation and regulation. The main limitation of this study is related to the constantly-evolving nature of DeFi technology. Recommendations for its regulation may vary as new evidence becomes available, but this document may pave the way for further research.
JEL Classification: F3; G1; G2; G3; K2; O3.
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