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Vitalik Buterin rejects KYC in DeFi and has a regulatory proposal

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Key facts:
  • For Vitalik, regulations must protect consumers and crack down on cybercriminals.

  • Ethereum co-founder proposed rules that could be useful for DeFi.

Vitalik Buterin, co-founder of Ethereum, posted a thread on the social network Twitter in which he takes a stance on regulations burdening cryptocurrencies and decentralized finance (DeFi).

Buterin express That current regulations leave “room for cryptocurrency-related projects to operate internally” but make it difficult for many other projects to reach the vast majority of people. In his view, this is worse than those regulations that “interfere with the inner workings of cryptocurrencies.”

He also commented that the application of Know Your Customer (KYC) policies does not seem “very helpful” to him for DeFi. This is because they would be a nuisance to users and would not combat cybercriminals..

On the other hand, supports the use of KYC in cryptocurrency exchanges.. “This is clearly a much more sensible place to employ it, and this is already happening,” the specialist explained.

The main goals of regulation, according to Buterin

For Buterin, there are two main types of objectives that need to be covered by regulations.

The first of these should be. consumer protection and secondly, they must make it more difficult for “bad guys” to steal and move large amounts of money.

“The problems related to the second point are not concentrated in DeFi, but in large-scale cryptocurrency payments in general,” he added.

Buterin also proposes some other rules that, in his opinion, could be useful and should be included in the DeFi ecosystem.

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The first rule suggested is to set limits of leverage. According to Cryptopedia, the educational section of CryptoNews, this is borrowing through credit to increase the profitability of a business operation.

Second, it proposes greater demands for transparencyin addition to audits or other security checks made in the smart contract code.

Third and finally, it calls for “the controlled use of knowledge-based evidence,” said Buterin, who also advocated for regulations allowing the additional use of zero-knowledge evidence, a principle that preserves privacy.

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