DeFi stands for decentralized finance which means it is not controlled by any single authority. This means if there is a DeFi exchange, the control of that lies in the hands of the people. But even though the main idea of DeFi is decentralization, SEC chairman Gary Gensler disagrees with the idea. He thinks that DeFi platforms are highly centralized in many aspects. In fact, Gary even said that it would be important for all DeFi projects to register.
DeFi platforms are not completely decentralized
According to Gary, the DeFi platforms are developed by a small group of people who promote the project for their own benefit. This makes the decentralization part of DeFi invalid. Even though I couldn’t completely agree with the idea, Gary wanting that DeFi projects register is a good thing, this will increase security and reduce the chances of frauds taking place in the sector. Gary does agree that there are some aspects that are decentralized about these platforms, but other than that, it’s all controlled by a single authority.
Gary also doesn’t like the idea that a Defi platform has a developer group that is able to keep the fees of the platform. In fact, there are a lot of layers in between, which makes the platforms filled with controlling authorities.
The SEC commissioner has also given a similar statement on DeFi. She said that if the SEC is able to find even one part of a project that seems to be centralized, then they will regulate it. This is why it becomes important for the DeFi projects to be 100% decentralized. And in that case, the regulators will not have anything to regulate.
Regulation is not entirely bad.
The number of hacks and attacks in the DeFi space is a little alarming. There are so many projects emerging in the space that it is not easy for investors to find good projects. This is why if the SEC is able to get DeFi projects to register and can check if they are eligible, it won’t be a bad thing as such. In fact, maybe the projects will focus more on security, and people won’t lose any more money in the future.
What are your thoughts on the DeFi platforms being called centralized? And do you agree with the idea? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.