Decentralized banking will flourish after regulatory incorporation

cmorq’s first principle is “Empower and protect individual ownership!” While we understand the consumer protection view of regulatory mandates, we believe fighting for consumers starts by empowering them.

The Federal Reserve estimated 55 million Americans are underbanked, but that is only the tip of the iceberg when it comes to how the current financial system penalizes lower-income Americans, who pay the highest rates, fees, and penalties.??

By contrast, decentralized finance (DeFi) empowers consumers through:

• Faster and cheaper transaction settlements
• More accessible banking services like borrowing and lending
• Inclusive ownership; ability to benefit from this growing sector

Those benefits are not at all in conflict with any regulatory mandate in the US; moreover, they are aligned with our values and required for us to maintain our global financial leadership position.

Regulators incorporate new technologies into the law; they don’t identify or experiment or build new technology themselves. Regulators probably initially had a similar reaction to electric lamps vs. gaslights or cars vs. horse carriages. It is a hard job to come up with laws that work with the next great technology!?

“DeFi is an open-source ecosystem with the potential to completely democratize banking and finance…” Katherine Relle, Portfolio Manager at JPMorgan, shared her views on DeFi “I think US regulators will not be able to avoid incorporating these new technologies into future financial regulation - we are already beginning to see them do so.”

For example, Gary Gensler’s team at SEC understands Blockchain, but their mandate is not to innovate the (compliant) technology that delivers on its promise. As regulators react to DeFi developments, digest, and shape a regulatory framework, DeFi will gain additional strength to replace the existing legacy and mostly unlevel consumer finance rails.?

Ian Rosen, CEO of Financial Answers and former CEO of StockTwits shared, “Once DeFi banking tools are regulated in a way that protects consumer interests while preserving their inherent advantages, they will quickly replace the inferior and expensive existing financial plumbing.”

Furthermore, many of the regulatory frameworks in finance are necessary because of a lack of transparency in the existing financial system. As we hit the ground running by implementing this new financial system, the transparency of blockchain technology will allow regulators to more easily deliver streamlined, user requirements. After all, the primary data for DeFi is all on the Blockchain, already public!

John Popeo, Partner and Head of Financial Services Regulation at The Gallatin Group, shared, “DeFi affords participants and regulatory authorities alike unprecedented transparency that benefits both parties.? However, many DeFi initiatives do not fit neatly within the existing U.S. financial regulatory landscape.? As a result, regulators are grappling with whether and how they can regulate DeFi projects and customers under current regulatory frameworks.”

Innovators in electricity, cars, computation, etc. fought similar battles to clarify the value propositions for their respected innovation and in doing so, allowed us to move forward into better futures. As innovators in the space, we honor their work by joining this battle to build new financial rails that empower ALL consumers.