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What To Expect From The Regulation Of Cryptocurrencies And DeFi In Brazil During 2023

With the approval of PL 4401/21 in the Chamber of Deputies in Brazil as legislation intended to regulate or create regulatory parameters for the cryptoactive market, the sector and the legislation finally won a minimal regulatory framework for a disruptive environmentwhich opened the speed of adaptation of the legislation to technological innovations.

According to Dan Stefanes, attorney and CEO of Blockchain One, Although we can recognize several points of improvement in the LP, we have to recognize that the promulgation of some law is even better than the absence of any regulation.

The creation of the regulatory framework for crypto assets, as it has been called, also serves to give a new look at this class of assets, since it seeks to give this market a greater seal, allowing the existence of a regulated environment that must be subject to all applicable regulations of the financial sector, by applicable law, demystifying the association, which is almost always absurd and with unimaginable levels of ignorance, crypto and crime“, said.

In addition, such a legislative proposal is right in not invading the organic competence of the Executive Branch, giving it the opportunity, according to a better analysis of convenience and aptitude, to define which entity of the Federal Public Administration will have competence to regulate the virtual asset market and your service providers.

However, for those more familiar with the technological innovations of the crypto industry, said text, despite an excellent start for the proper development of the national crypto-economy, remains focused on centralized entitieswhich have been suffering several credibility losses due to poor security controls, or even non-existent.

Stefanes says that these centralized institutions are prone to excessive risk accumulation, as they they have finances without adequate levels of transparency and often have “financial reward systemsfor your employees, misaligned with the interests of its users, creating an environment of hyper-vulnerability for consumers. .

These centralized projects must, in fact, have a regulation directed to their activities, given the general scenario of information asymmetry. However, with the continued advancement of blockchain technology, the very idea of ​​centralized projects with intermediaries with discretionary power over program administration is becoming obsolete, especially with the emergence of complex digital and decentralized financial ecosystemsDan continues.

DeFi, or decentralized finance, harnesses the benefits of blockchain and distributed ledger technology to reinvent the financial system. By putting smart contracts into practice, DeFi enables the decentralized and autonomous operation of financial services, leading to a profound transformation of traditional financial services and making the involvement of trusted institutional agents, such as financial institutions, unnecessary.

Financial decentralization transfers the trust that market participants place in institutional agents to the network code and consensus rules.“.

the rise of DeFi has allowed this technology to go from being a utopian idea to a practical solution to deal with the risks associated with traditional and centralized financial systems.which are often subject to manipulation by human intermediaries, and DeFi technology has the potential to eliminate these risks and better serve the needs of all parties involved.

Dan continues, stating that DeFi has a very high level of transparency, with all the details of the protocols and their operations available on the blockchain for anyone to see, differing again from the traditional financial system where many of the operations and decisions are made by the institutions, which can be opaque and, at least, ethically dubious.

While fraud is indeed commonplace in the financial environment, this is a basic conclusion realizing that this ecosystem flourishes on trustthe starting point of the fraudster. There can be no fraud without trust and a large part of our institutional financial system depends directly on the trust we place in institutional intermediaries. Y that’s exactly what DeFi says: finance without trust“, Explain.

Despite being a great tragedy for the crypto economy as a whole, the fraud perpetuated using blockchain technology as a mask for every cunning fraudulent scheme, as in the cases of FTX, 3AC, Terra/Luna, Voyager, etc., the loss of confidence from institutional and retail agents to centralized financial institutions or agents reinforces the value of DeFisince as we lose confidence in centralized finance, we must gain confidence in DeFi.

Some major players already recognize DeFi as a response to recent frauds uncovered with the bear market progress we are experiencing, such as Telegram, which announced the development of a digital wallet and a decentralized exchange for trading digital currencies. Along the same lines, financial market giants such as JP Morgan, made their position clear by identifying centralized brokers as the cause of recent crypto crasheslike that of FTX.

Finally, there is value in the Regulatory Framework for Cryptoassets, but the new law is already lagging behind in terms of innovation.

The new technologies will need the watchful eye of the Executive and Legislative powers even in 2023, so that decentralized models result in a fair relationship between economy and society”, he concluded.

Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

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