By Evan Spicer
Director of Cryptocurrency Investigations
MyChargeBack
Regulation of crypto platforms and digital currency by the European Union is now a virtual certainty. On October 10, the Markets in Crypto Assets bill (MiCA) passed the European Parliament. Widely seen as an answer to the problem of crypto scams, this legislation has provisions to fight money laundering, protect consumers, improve transparency in crypto transactions and reduce bitcoin mining’s carbon footprint.
However, MiCA, which is expected to take effect in 2023, has raised additional questions and concerns. Crypto fans may wonder about the future of decentralized finance (DeFi) platforms in the face of EU regulation.
Is MiCA Declaring War Against DeFi? Not Really
Those who prefer peer-to-peer, decentralized financial innovation may understandably see government regulation as a threat. However, the EU’s aim doesn’t seem to be motivated by a desire to quash innovation or destroy decentralized financial products and platforms.
Although strict requirements are limiting the volume of crypto transactions and non-euro-backed stablecoins, DeFi platforms are likely to be safe as long as they are open to accountability, and transparency and are willing to take steps to combat crypto scams.
There is little question that larger DeFi platforms are likely to survive, especially if they are willing to work together with authorities and consumers to improve security and reduce the number of bitcoin frauds.
However, smaller, dark-horse DeFi operations are likely to be hit hard by the new rules, especially if they lack the resources and the reach to compete in an increasingly stringent environment.
Preventing DeFi Platform Scams
There is no way, obviously, to completely eliminate the possibility of bitcoin frauds, but regulations and DeFI platforms themselves can take steps to greatly reduce nefarious activity and to keep customers safer.
Voluntary policing can go a long way to tighten security. One example is MIT’s Digital Currency Initiative, which in 2017 compelled IOTA protocol security standards to be beefed up by pointing out vulnerabilities. IOTA is an open-source distributed ledger that handles transactions between connected devices in the IoT ecosystem,
Another key strategy may be the regulation of oracles, which secure external information for blockchains. This information can provide a gateway that will keep customers better informed about what is going on in the real world and on the platform and will help authorities keep tabs on the security situation and to detect and deal with threats when they arise.
Have You Lost Money to a De-Fi Scam?
Certainly, the passage of new legislation governing crypto assets is encouraging. The aim isn’t to limit autonomy, but to bring crypto platforms more in line with banks and other financial institutions regarding regulation.
MiCA means that Virtual Asset Service Providers (VASPs), as well as decentralized and OTC platforms, will have to provide a certain level of security for their customers. Hopefully, this means that platforms will be more accountable to customers who have fallen victim to crypto scams.
This is good news for the consumer, but there is a long way to go before these platforms are safe and free of bitcoin fraud. If you’ve lost money on one of these platforms, seek advice from our experts who will get you started with the road to crypto recovery. We will investigate your case and create an intelligence report that will help authorities track down your cryptocurrency and identify the culprits.
