Is Defi protocol free from the government

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Quote from: avikz on May 26, 2023, 05:11:21 AM

Quote from: KiaKia on February 24, 2023, 01:39:49 PM

Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

If the company or a person running a Defi protocol is able to hide their identity, there's no way for a government to regulate them directly. However a government can always use a strong internet firewall to restrict access for it's citizens. So indirectly a government can regulate them.

Defi is posing a huge risk in the mainstream financial market today as it is very very easy to convert the black money into white. So it's a security risk as well as these can be easily used to finance terrorism activities and any kind of illegal money transactions.

In theory governments could not regulate DeFi, but the problem is that nothing is really decentralized. Most DeFi organizations have a central figures, commercial browsers need permission to have wallets as attachments, and as long as we are ultimately valuating things in fiat money, or dealing with fiat money at all.

And if we want to keep current form of civilization that has taxes, we need to have transparency on wealth and AML laws. This is where FATF comes in and basically renders any cryptocurrency unusable that you can't prove where you got it from.

Things have become way more complex and while it's still possible to launder money i am not going to give any examples how to do that as i don't think it's ethical. But DeFi is not the key element in that.

avikz

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

If the company or a person running a Defi protocol is able to hide their identity, there's no way for a government to regulate them directly. However a government can always use a strong internet firewall to restrict access for it's citizens. So indirectly a government can regulate them.

Defi is posing a huge risk in the mainstream financial market today as it is very very easy to convert the black money into white. So it's a security risk as well as these can be easily used to finance terrorism activities and any kind of illegal money transactions.

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

The word defi is known as decentralized finance for a reason, everything surrounding it is meant to be decentralized from the teams, the communities, and the protocols level and that is why most often than not, the teams that operate and found decentralized finance systems are usually anonymous to protect the community, the protocol and the people who used the protocol because ones they are been compromised by the government individuals, it is no longer decentralized.

However, there is a concern about being anonymous in the crypto ecosystem, teams and individuals use the anonymous privilege to run to swindle people, manipulate protocol with an exit door, rug pull, and also insider stealings. The government is very concerned about this repeated stealing of people's money that is bringing down families because they are trying to make a living through crypto, that is why you see many are calling for crypto(altcoins) regulations.

noorman0

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

-snip-
do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

It depends how the protocol was designed. If, for example, a company is definitely established in the midst of a highly regulated country, the scenario of regulatory intervention may not be ruled out if the founders can be identified. The anticipation can be technically many things, for example the need to run protocols without a single operation and spread anonymously. Then it also becomes a hard process to close or change the defi protocol.

Hispo

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If there is a way, it would be through the interception and contact by governments to the people who develop Defi platforms and projects.

In the case of a Defi protocol that became very popular among the people and the volume started to look like one of a big bank, the authorities would try to legally challenge the developers, in order to force them to close or cease the support.

This is the reason some people believe there is some value behind being an anonymous developer as Satoshi was.

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Quote from: serjent05 on February 24, 2023, 05:00:04 PM

As long as the person or company is known running the Defi Protocol, there is a huge chance that it can be regulated by the government. As stated on the earlier reply, there are already Dencetralized exchanges that were shutdown by the government especially if it is operating in the USA without proper documentation or license.

Not because it is decentralized, it will be out of gasp of the government, I think it does not work like that, Government may find it hard to control but they will definitely do the best they can to regulate every Defi.

if the defi project will be regulated, it means, they also need to require certain kyc requirements from their customers. if that happens, the concept of defi is technically not respected anymore. so it will be the same as centralised platforms. there won't be anymore difference. don't know how DEXs will survive if the government will indeed be hard on them as well.

hatshepsut93

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Some DeFi protocols have master keys owned by developers that allow them to interfere with the system. Other DeFi protocols run on centralized blockchains that are not resistant to government pressure. Some DeFi systems might rely on other systems that can be regulated - like centralized stablecoins or banks.

And the word "finance" is too generous when talking about DeFi. It's not an alternative to centralized finance, because it does not offer full spectrum of services. You can't get a business loan through DeFi, or invest in government bonds, or get a stake in a company.

Hydrogen

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

do you think there is a way to make defi projects betray decentralization because of the wrath of the government?

We see this being attempted all over the world. Nations like china implement a great firewall to censor internet traffic. VPNs, proxies, etc are used to bypass state imposed restrictions.

Platforms like thepiratebay tried to avoid government restrictions with servers located in countries which did not extradite criminals to the united states. They also planned to have servers housed inside of drone aircraft in neutral international territory in an effort to bypass state regulation.

To some extent computer virus authors, malware writers, botnets and other cybercrime demographics have long evaded authority figures.

There is no shortage of effort made to avoid censorship and restrictions.

If it were possible to put a defi project on mars or the moon and have it accessible to earth by internet. That might put the protocol out of government reach. But then maybe it wouldn't.

serjent05

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As long as the person or company is known running the Defi Protocol, there is a huge chance that it can be regulated by the government. As stated on the earlier reply, there are already Dencetralized exchanges that were shutdown by the government especially if it is operating in the USA without proper documentation or license.

Not because it is decentralized, it will be out of gasp of the government, I think it does not work like that, Government may find it hard to control but they will definitely do the best they can to regulate every Defi.

jossiel

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The reality with these DeFi platforms is that they're not fully decentralized. Just like the projects that we've seen before. Actually, too many of them said to be decentralized but after being looked at, it tends out that they're not.

If these platforms are just like bitcoin which is wholly decentralized, even how hard these governments try to track them down and regulate them, there's no way for them to stop it if it's being backed up by people around the world.

Quote from: o48o on February 24, 2023, 04:13:38 PM

Regulated Decentralized Finance (RegDeFi) is coming, that's for sure, because for a while now DEXes have blurred and bended the definition of “Exchange”, and regulators are still trying to keep up while new innovations that need different rules.

First time to read about RegDeFi but yeah, I get the idea and that's where we're going and probably we've already been there in actual.

o48o

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

Regulated Decentralized Finance (RegDeFi) is coming, that's for sure, because for a while now DEXes have blurred and bended the definition of “Exchange”, and regulators are still trying to keep up while new innovations that need different rules.

And they already work with regulators. Uniswap for example has banned hundreds of wallet addresses for alleged crimes. And they are not doing that from the goodness of their heart or because they want to centralize everything. They are being pressured by regulators to comply with them as basically every "exchange" is subject to regulatory compliance.

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

If we speak about theory, then yes: I believe it's possible to ban/regulate etc DeFi simply by criminalizing any participation in it. However, in real life it's easier said than done. A country has to have a huge and very advanced cyberpolice force in order to track down every (or most) DeFi user. It's not very realistic and unsustainable.

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There are dexes that were closed back then. One example is the EtherDelta which is the fork of ForkDelta. The defi platforms are still not safe for as long as SEC identifies its owner, it can be closed. SEC will charge them for operating an unregistered securities exchange.

Unless the defi is not operating in US, probably Hongkong I think it will be fine. Just be cautious because the Chinese government can also look into it and suddenly changes its stance.

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I guess it depends on what you mean. Systems that rely on votes and are fully decentralised (like pos systems like makerdao) seem like they'd be extremely difficult for governments to control and ultimately hard to centralise and maybe impossible to control.

Other aspects of defi like usdc and usdt are probably controllable as their collateral is centralised. Afaik they make up large portions of dai's collateral but it's likely collateralised so much a central entity would need good timing to actually be able to collapse it and they'd likely take the entire stablecoin industry out with it if it was possible.

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Quote from: KiaKia on February 24, 2023, 01:39:49 PM

Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

As the name implies, it is decentralized. There's no way a central entity, let alone the government, could control it. Sure, you can incarcerate the people who were behind the project and keep them for as long as you like, but the protocol itself will remain running on the web for an indefinite amount of time. I saw this happen with Forsage, that DeFi project that turned out to be a big sham and a Ponzi scheme. The founders and a couple executives behind this project is already indicted and are slated to get their jail time soon, but as it stands today Forsage is still apparently running. So to answer your question, I think DeFi is uncontrollable, at least by a central government or a single entity, but have the public go against it and it will collapse.

KiaKia

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Let's talk about decentralized finance DeFi, is there any way possible that the government can regulate DeFi protocol? I see that it's easier to go after Centralised exchanges than decentralized projects, do you think there is a way to make defi projects betray decentralization because of the wrath of the government? Drop your thoughts.

Topic: Is Defi protocol free from the government (Read 109 times)