DeFi was top of the agenda at the CFTC’s tech committee meeting, with crypto execs giving explanations and discussing the space with the regulator.
The United States commodities regulator has gotten a crash course on decentralized finance (DeFi) today, with crypto executives briefing 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 with the aim of covering key 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.
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 their transparency, immutability and privacy saying it could allow regulators to balance the “right to privacy with the need for security.”
On the subject of decentralization, Redbord along with Nikos Andrikogiannopoulos, founder of analytics firm Metrika, jointly outlined the benefits and issues currently facing decentralization which concluded that the benefits “far outweigh” the challenges which they believe will “self-resolve.”
“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 amount of 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.”
Currently DeFi’s Total Value Locked (TVL) 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, CSO of blockchain infrastructure company Espresso Systems then provided an overview of the current solutions for digital identity and non-custodial wallets, using respective examples of the Ethereum Name Service and a MetaMask wallet.
Fireblocks founder, Michael Shaulov and Trail of Bits founder, Dan Guido then presented on 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 and DeFi was on the receiving end of 113 exploits out of the 167 carried out across the year.
Shaulov then gave a brief account and explanation of the exploits carried out against the Ronin Bridge, BadgerDAO and the recent exploit of the DeFi protocol Euler Finance.
The DeFi portion of the meeting ended with members unanimously voting for the creation of a Digital Assets and Blockchain Technology Subcommittee.
The subcommittee will focus on the “why of DeFi,” what problems it solves and use applications along with vulnerabilities and proposed legal and policy frameworks.