The European Securities & Markets Authority (ESMA) released a comprehensive report on challenges that decentralized finance (DeFi) presents to regulat
ESMA report underlines the increasing complexity of DeFi with several protocols being built on top of each other. The report categorizes smart contracts into five groups, a step towards its potential inclusion in future regulatory frameworks like MiCA. The set of clear rules has made way for more crypto businesses applying for licenses in the region. ions on Wednesday.
Crypto businesses expand into the EU ESMA also notes the potential of smart contracts in financial innovation, primarily due to their composability feature that allows open-source integration and interaction of decentralized applications .However, the agency highlights several risks associated with the sector, including the inability to modify or terminate smart contracts, transaction-ordering dependency, timestamp dependency, lack of accountability, and the rise of illicit smart contracts.
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