'Any law that would impose sweeping obligations on DeFi should at the very least know what it is regulating. Defining what it means to be a decentralized exchange is the right place to start,' wrote jenniferjschulp and JackSolowey. Opinion.
, a Web3 application that requires payment in ether can still transact with holders of other cryptocurrencies by leveraging a third-party token swap protocol to perform the conversions.
as “intermediary risks” – the potential for financial middlemen to mishandle assets and information in their possession. Regulations to address intermediary risks don’t make sense for software designed to achieve disintermediation.For example, under the DCCPA, covered platforms would be required to “hold customer property in a manner that minimizes the risk of loss.” This is relevant to a centralized, custodial exchange but not to a DEX where users self-custody their tokens.
Consider how a mandatory registration regime would impact composability and permissionlessness in the example described above of a Web3 app leveraging a DEX protocol for token conversions. Given the DCCPA’s broad definition of trading facility, the app itself might be treated as a covered digital commodity exchange. If so, interoperability with DEX protocols would be a compliance risk, undermining the benefits of composable code.
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