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FATF: DeFi with identifiable controllers should be regulated as virtual asset service providers

The Financial Action Task Force (FATF) stated in a report released on Tuesday that if identifiable individuals retain "control or sufficient influence" in DeFi arrangements, its rules apply, regardless of how decentralized the project claims to be.FATF noted that many DeFi projects still frequently exhibit centralized elements in practice, including the concentration of governance tokens, management authority, upgrade control, and fees and rewards flowing to insiders. The report categorizes DeFi into three types: those with identifiable controllers, those that are actually centralized but where operators are hidden, and those that are truly leaderless, with only the last category not subject to its standards.The report stated that nearly 93% of jurisdictions responding to the survey have not applied the relevant standards to any qualifying DeFi arrangements, with only 26 out of 142 jurisdictions having assessed risks, 4 having established licensing rules, and only 2 having registered or licensed relevant platforms. FATF requires countries to mandate or encourage DeFi projects to embed anti-money laundering controls into smart contracts or interfaces; for platforms that refuse to cooperate, jurisdictions may prohibit them from operating locally as a last resort. The report also stated that the total value locked in DeFi reached $86.6 billion this year, an increase of approximately 85% compared to 2023.

a16z: TradFi is not embracing the DeFi model, but rather accelerating the adoption of blockchain technology

a16z published a blog post stating that as traditional financial institutions accelerate their exploration of blockchain technology, the market generally believes that the future will see a comprehensive integration of DeFi (Decentralized Finance) and TradFi (Traditional Finance), forming a new financial model through the combination of decentralized finance and institutional distribution systems.However, the reality may not be so. The core motivation for traditional financial institutions to adopt blockchain is not to embrace decentralization, but to value its commercial benefits in reducing costs, improving settlement efficiency, expanding distribution channels, and optimizing customer relationship management.What is more likely to emerge in the future is a new type of "programmable financial infrastructure" based on underlying blockchain technology, optimized for institutional needs, rather than a simple integration of traditional finance and DeFi. Institutions are selectively absorbing certain technological capabilities from DeFi and modifying them according to their own regulatory, risk management, and operational requirements.For example, atomic settlement can reduce counterparty risk, shared ledgers can lower back-office reconciliation costs, programmable funds can automatically execute processes such as interest payments, margin management, and corporate actions, and automated market-making models are also being applied to on-chain foreign exchange and tokenized asset pricing.At the same time, the native DeFi features of open access, anonymity, and trustless execution often conflict with institutional requirements for compliance, control, and accountability. Therefore, cases such as JPMorgan's institutional blockchain project, BlackRock's and Franklin Templeton's tokenized funds, are essentially not traditional finance entering DeFi, but rather using blockchain technology to improve existing financial business processes.In the future, the blockchain industry will have two development paths: on one hand, enterprises and financial institutions will continue to promote the implementation of blockchain infrastructure that meets regulatory requirements, expanding the industry scale through applications such as stablecoins, tokenized assets, and on-chain settlements; on the other hand, open networks will continue to play the role of a source of innovation, continuously generating new financial primitives and market mechanisms, providing technical reserves for future institutional infrastructure.TradFi and DeFi are not in competition but are developing together in different directions. Traditional finance may not fully adopt the DeFi model but will gradually adopt parts that suit its own needs. The true integration may ultimately occur at the underlying blockchain network level, rather than one side replacing the other.For developers, the key is not to chase all markets simultaneously but to clarify the target audience: for institutions, products need to be built around compliance, risk control, and long-term business processes; for open networks, there is a need to continue exploring innovation, liquidity, and network effects. The future financial system may operate on blockchain infrastructure, but the most important innovations may still come first from open networks.
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