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Polygon Labs’ Framework: DeFi as Critical Infrastructure

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Polygon Labs' Framework: DeFi as Critical Infrastructure

A new regulatory framework proposed by Polygon Labs and Arktouros co-founder Michael Mosier suggests that decentralized finance (DeFi) protocols should be classified as “critical infrastructure” and be overseen by federal cybersecurity agencies in the United States. The framework, titled “A Conceptual Framework for Combating Illicit Finance Activity in Decentralized Finance,” recommends that the U.S. Treasury’s Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) oversee truly decentralized DeFi protocols. While the OCCIP is not an official financial regulator, it coordinates efforts to enhance security and resilience in the financial services sector. The paper emphasizes that not all DeFi protocols are truly decentralized and that those with centralization points should be subject to existing financial regulations.

In addition to classifying DeFi protocols as critical infrastructure, the proposed framework suggests creating a new category of “critical communications transmitters” that interact with and are inherent to genuine DeFi systems. These entities would have specific obligations to protect U.S. national and economic security without being classified as “financial institutions” governed by the Bank Secrecy Act (BSA). The framework also recognizes centralized finance (CeFi) or TradFi as separate entities with independent control, based on guidance from the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Notably, policymaker concerns in Washington DC are primarily focused on illicit finance, rather than securities and commodities laws. This proposed framework could offer a potential solution to address these concerns. The authors emphasize the need to not only combat illicit activity but also empower beneficial activities, aligning with the Treasury’s goal of promoting economic prosperity and ensuring the financial security of the United States.

13 thoughts on “Polygon Labs’ Framework: DeFi as Critical Infrastructure

  1. Giving federal cybersecurity agencies oversight of DeFi protocols could lead to increased government control and surveillance. Not a fan.

  2. I appreciate the emphasis on distinguishing between truly decentralized DeFi protocols and those with centralization points. It’s important to subject centralized ones to existing financial regulations.

  3. Federal agencies should focus on more pressing issues rather than getting involved in overseeing DeFi protocols. This proposal misses the mark.

  4. This framework could limit the accessibility of DeFi to average users and only benefit big institutions. It’s not fair.

  5. I’m excited about the possibilities that this framework could unlock for the DeFi space. It’s a step towards mainstream adoption and greater reliability.

  6. This framework’s emphasis on protecting national and economic security shows a keen understanding of the broader implications of DeFi in today’s interconnected world.

  7. This framework takes into account the nuances of decentralized finance, ensuring that regulations facilitate innovation rather than stifle it. A forward-thinking approach.

  8. With this proposed framework, we can strive for a DeFi ecosystem that genuinely prioritizes the safety and interests of its users. A positive step forward.

  9. This proposal could create more red tape and bureaucratic hurdles for DeFi projects, hindering their growth. It’s not a good idea.

  10. This framework shows that the government is serious about embracing decentralization and leveraging it for the benefit of the economy. A positive sign for the future of DeFi.

  11. Another example of excessive government regulation! Let the decentralized nature of DeFi thrive without unnecessary interference. 🙄

  12. This proposed framework could be a game-changer for decentralized finance! Finally, a step towards ensuring the security and integrity of DeFi protocols.

  13. It’s refreshing to see policymakers recognizing the potential of DeFi while addressing its challenges. This framework strikes a balance between regulation and innovation.

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