A few weeks ago, REVIEWS e Sam Bankman-Fried over regulations had sparked heated debates within the cryptosphere. Stock exchange CEO FTX had particularly drawn the ire of the DeFi community by suggesting the creation of “whitelists” to facilitate the identification and censoring of transactions involving sanctioned actors.
Co-founder of Ethereum, Vitalik Buterinseems to have taken note of what happened and took to Twitter in turn, starting a multi-part thread with the following statement:
Should I be giving my opinion on regulating the crypto sector more often? I find it unfair to allow other people to be attacked by CT (Crypto Twitter) when I never come out of my lair.
The crypto sector is not ripe for the arrival of institutional investors
According to Buterin, the priority should be to preserve the principles that are the basis of the crypto sector, namely resistance to censorship and decentralization. To that end, he doesn’t seem particularly enthusiastic about the idea of attracting institutional investors at any cost.
“One of my views, perhaps controversial, is that we should avoid enthusiastically chasing large institutional capital. I’m actually quite happy that many ETFs are being delayed. The ecosystem needs time to mature before attracting even more attention.”
She too added :
In essence, (…) regulation that leaves players in the crypto space free to operate as they wish internally but prevents adoption of crypto projects by the general public is more favorable than regulation that interferes with the inner workings of cryptos.
How to implement KYC protocols in DeFi?
The DeFi sector is arguably the one that seems most problematic for regulators. However, Buterin opposes the idea of user-level KYC protocols.
“The idea of KYC on the front ends of DeFi protocols doesn’t seem very useful to me: it would annoy users but do nothing against hackers. Hackers already use personal code to interact with contracts. Exchanges are definitely a much better place for KYC.”
According to Buterin, regulatory efforts should focus on the following two points: protecting consumers and limiting the movement of large amounts of money by malicious actors. Moreover, the problems related to the second point are not specific to DeFi, but affect the entire crypto payment ecosystem.
He notes, however, that some metrics on the DeFi fronts could probably be useful and include:
- leverage limits;
- the obligation of transparency for checks and other security checks carried out in the contract code;
- using knowledge-based tests rather than minimum wealth rules.
Finally, Buterin did not fail to mention zero-knowledge non-interactive trial (zero-knowledge non-interactive summary proofs or zk-SNARK), a technology he considers to be as important as the blockchain itself. He has is recommended using them to meet regulatory requirements while preserving user privacy as much as possible.
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