“Defi movement gonna really crazy & at the same time those Innovators who are coming up with new projects based on DeFi are more or less under several legal issues”
“By its very nature, DeFi is designed to be permissionless and, currently, operates within the ‘grey’ area of the financial industry — which, as we know, is a highly-regulated market. Currently, DeFi operators seem to have an unspoken ‘code of conduct’ in which they are good players in the space. Regulators are clearly watching the space carefully and, as we know, are reactive in approach rather than proactive. One transaction could topple the apple cart, so to speak.”
Decentralized finance, commonly referred to as DeFi, has seen significant growth in the second quarter of 2020. Daily transaction volumes hit an all-time high of on June 21. The total USD value locked in DeFi $1.95 billion in Q2 2020 — a quarterly growth of 311%. And since July, that value has surged to $2.83 billion.
“At the heart of a smart contract, there is, by legal definition, a contract — even though it appears to be wearing a new outfit. The terms of the smart contract form the legal agreement between the two parties. That being said, consideration should be made as to whether the developer of the smart contract should also be liable.”
Consideration should be given as to governance — which regulator may be involved, which governing law does the contract rely on? Regulations may only have limited protection for smart contract vulnerabilities. Parties will still need to do their own due diligence on the smart contract in order to determine that it is fit for purposes. As the Latin phrase goes,‘caveat emptor’ — buyer, beware!