INATBA’s Response to IOSCO’s Policy Recommendations for Decentralized Finance (DeFi) - INATBA
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INATBA’s Response to IOSCO’s Policy Recommendations for Decentralized Finance (DeFi)

INATBA has welcomed the commitment of the International Organization of Securities Commissions (IOSCO) to propose regulatory recommendations that balance investor protection and the advancement of new technologies in the global financial market. INATBA’s 140+ members, dedicated to blockchain technology development and adoption, express their support for bilateral interactions with IOSCO and offer their cooperation to help shape the future of decentralized finance (DeFi).

The report, which is available for download through the form below, emphasises key positions and considerations regarding the integration of DeFi into the regulatory framework.


Abstract of the report:

Thoughts for IOSCO’s Consideration:

  1. Interconnectivity Between CeFi and TradFi: Changes in centralized and traditional financial institutions should not determine the viability of DeFi. Regulations should be based on relative facts for each specific type of activity.
  2. Promoting True Decentralization: Regulations should provide clear targets for projects to achieve true DeFi status, distinct from DeFi In Name Only (DINOs).
  3. Emerging Industry: The DeFi industry is nascent, but it has grown significantly. Stringent requirements may harm the industry more than past collapses.
  4. Technological Limitations: Exploits and hacks are genuine concerns. Self-regulatory bodies and existing standards could efficiently address these issues, preserving DeFi’s innovation.

IOSCO Recommendations:

We agree with most of the recommendations, such as analyzing DeFi products, identifying responsible persons, achieving common regulatory outcomes, requiring disclosure, enforcing applicable laws, promoting cross-border cooperation, and understanding interconnections among DeFi, the broader crypto-asset market, and traditional financial markets.

However, some recommendations should be considered with caution, as DeFi is fundamentally different from centralized finance:

  1. Broad Interpretation of Securities Laws: Applying existing securities laws broadly to DeFi may not be appropriate for truly decentralized arrangements.
  2. Intermediation and Clearing/ Settlement: These concepts don’t apply to fully automated, decentralized activities.
  3. Machine Extractable Value (MEVs): These attacks are technical issues, not financial ones. Blockchain Consensus Mechanisms should be addressed separately.

Additional Guidance:

Clear guidance is needed, especially on disclosure and risk management, to maintain investor trust. The application of IOSCO standards should be tailored to each DeFi arrangement’s specific characteristics.

Technological Innovation:

Regulators can leverage blockchain technology to monitor and regulate DeFi while supporting innovation. We are willing to share specific tools and methods.

Evaluation of DeFi:

Various methods and mechanisms exist for regulators to evaluate DeFi products, services, and arrangements. A bilateral session to share information on these would be beneficial.


The framework that combines IOSCO’s recommendations for DeFi with its CDA report is effective, but improvements can be made to provide more specific guidance for decentralized projects. More clarity and specificity are needed to support the growth of DeFi in a compliant and risk-limiting manner.

INATBA is committed to working with IOSCO and its members to navigate the complexities of DeFi and foster a regulatory environment that encourages innovation while ensuring investor protection. We appreciate the opportunity to contribute to this vital discussion on the future of decentralized finance.


Please fill out the form below to access the full report: