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On DeFi and On-Chain CeFi: How (Not) to Regulate Decentralized Finance

Katrin Schuler et al.

Journal of Financial Regulation2024https://doi.org/10.1093/jfr/fjad014article
ABDC B
Weight
0.77

Abstract

This article proposes a framework to assess the factual decentralization of blockchain-based financial infrastructure, commonly referred to as ‘decentralized finance’ (DeFi). It discusses various centralization vectors along the DeFi architecture layers from a technological and legal point of view. Distinguishing between endogenous and inherited centralization, the importance of decentralization assessments for regulators is demonstrated. First, centralization vectors are a strong indication that a DeFi project may have (some) custodial properties warranting regulation. Second, centralization vectors reveal the avenues of control in projects, pointing out appropriate regulatory hooks. The article serves as an interdisciplinary introduction that analyses blockchain-based financial infrastructure and provides policymakers and regulators with a tool to identify the differences between truly independent, neutral infrastructure and fake decentralization. It concludes that the former may have very beneficial properties and can contribute towards a more open and transparent financial system, while the latter is a blockchain-based form of financial intermediation and should be regulated as such.

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https://doi.org/https://doi.org/10.1093/jfr/fjad014

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@article{katrin2024,
  title        = {{On DeFi and On-Chain CeFi: How (Not) to Regulate Decentralized Finance}},
  author       = {Katrin Schuler et al.},
  journal      = {Journal of Financial Regulation},
  year         = {2024},
  doi          = {https://doi.org/https://doi.org/10.1093/jfr/fjad014},
}

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On DeFi and On-Chain CeFi: How (Not) to Regulate Decentralized Finance

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Evidence weight

0.77

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact1.00 × 0.4 = 0.40
M · momentum0.97 × 0.15 = 0.15
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.