In this response, the WFE acknowledges that decentralized finance (DeFi) carries similar risks to traditional financial services and asset trading. We agree with the paper's analysis of the challenges in defining DeFi and emphasize that the concept of decentralization is often an illusion, as platforms where buyers and sellers interact inherently act as central entities. The concentration of governance tokens in DeFi platforms is a concern for the WFE, as it can lead to decisions that are not in the best interest of the protocol or the wider community. The WFE suggests that regulators should focus on applying regulations to the application level of DeFi services and highlights the importance of proper conflicts of interest management in vertically integrated models. We also criticize proprietary trading against clients and argue against platforms engaging in such activities while calling themselves "exchanges."
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