DeFi was on the agenda at the CFTC’s tech committee meeting, with crypto execs explaining and discussing the space with the regulator.
The United States commodities regulator received a crash course on decentralized finance (DeFi) on March 22. Crypto executives briefed the regulator on key issues affecting the space, including exploits, decentralization and digital identities.
As part of a scheduled first meeting of the CFTC’s Technology Advisory Committee (TAC) in Washington D.C., members from the crypto space gave presentations to the regular intending to cover critical issues currently impacting DeFi.
CFTC commissioner Christy Goldsmith Romero opened the meeting with prepared remarks, saying “understanding how DeFi works” is “important” as “policy decisions related to DeFi” are currently being made by regulators and lawmakers.
Fantastic day sponsoring the CFTC Technology Advisory Committee. Expert presentations on #DecentralizedFinance #CyberResilience #Cloud and #ArtificialIntelligence. Great thanks to Committee Chair Carol House, Vice Chair @ARedbord and all of the TAC members and presenters. pic.twitter.com/kByy2aDPq4
— Commissioner Christy Goldsmith Romero (@CFTCcgr) March 23, 2023
The panel began with an explainer on DeFi and blockchain technology by Ari Redbord, head of legal and government affairs at blockchain intelligence firm TRM Labs.
He outlined the claimed benefits of blockchains, namely transparency, immutability and privacy, saying it could allow regulators to balance the “right to privacy with the need for security.”
Redbord and Nikos Andrikogiannopoulos, the founder of analytics firm Metrika, jointly outlined the benefits and issues currently facing decentralization, concluding that the benefits “far outweigh” the challenges, which they believe will “self-resolve.”
Excited to join @CFTC TAC meeting sponsored by @CFTCcgr Christy Goldsmith Romero, Chair Carole House and Vice Chair Ari Redbord @trmlabs pic.twitter.com/QCXmpQ4cci
— Kristin N. Johnson (@CFTCjohnson) March 22, 2023
“We’ve reached a point in time where we can no longer ignore decentralization,” Andrikogiannopoulos said. “Not only do we have to embrace it, but I think it’s our duty to lead it in the right direction.”
Redbord highlighted the total value that entered DeFi in the last two years, saying it was “stress tested during FTX [...] and did not fail. DeFi is absolutely here to stay.”
DeFi’s total value locked is around $49.1 billion, according to DefiLlama, rising from around $15 billion at the beginning of January 2021.
Carole House, executive in residence of venture firm Terranet Ventures, and Jill Gunter, chief strategy officer of blockchain infrastructure company Espresso Systems, then provided an overview of the current solutions for digital identity and noncustodial wallets, using the examples of the Ethereum Name Service and MetaMask wallet.
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Fireblocks founder Michael Shaulov and Trail of Bits founder Dan Guido then presented the exploits and vulnerabilities that have, and continue to, take place in the market.
“All the hacks, they are extraordinarily public, and it’s usually your users and other outside firms that find out about them before you do,” Guido remarked, which he said instills a “need for perfection” in crypto firms.
Throughout 2022, the top 10 exploits in crypto alone saw over $2 billion lost, with DeFi on the receiving end of 113 exploits out of the 167 carried out across the year.
Shaulov then briefly explained the exploits carried out against the Ronin Bridge, BadgerDAO and the recent Euler Finance exploit.
The DeFi portion of the meeting ended with members unanimously voting for creating a Digital Assets and Blockchain Technology Subcommittee.
The subcommittee will focus on the “why of DeFi,” what problems it solves, use cases, vulnerabilities, and proposed legal and policy frameworks.
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