Is DeFi, Legally, Even a Thing?
Plus, Ron DeSantis shares a wacko theory.
Number of the Week: 400 (explanation below)
Is DeFi, Legally, Even a Thing?
Let’s step back for a moment and try to make the best case for decentralized finance. The idea of “centralized” finance has been around for more than a century, and is woven into our understanding of economic growth, stability and quality control. Without a central, regulated stock exchange, for example, you could literally have people standing outside the New York Stock Exchange buying and selling the same shares (and other things, like gold) trading inside, as happened in earlier centuries with a massive caveat emptor. Essentially every developed economy in the world today has a central bank, with the European Central Bank overseeing the monetary policy of multiple countries.
But centralization has its discontents. Central banks dictate interest rates, often creating mass unemployment if that’s what they deem necessary (Paul Volcker’s regime at the US Federal Reserve Bank in the early 1980s is Exhibit A). A centralized banking system imposes fees for the transfer of funds, and can freeze out financial players for whatever reasons it chooses. Central banks are typically tied to governments, which have their own agendas. And central banks erect opaque walls around their decisions and operations.
And so 21st century technology enabled the dream of “decentralized finance,” or DeFi.