Decentralized Finance (DeFi) – A Beginner’s Guide - Generate Passive Income with DeFi & Cryptocurrencies : Staking, Lending, Liquidity Mining, Yield Farming – Explained Simply by Eddie Wolfie

Author:Eddie Wolfie [Wolfie, Eddie]
Language: eng
Format: mobi, pdf
Published: 2022-02-25T00:00:00+00:00

Regulation and prohibition of DeFi

Cryptocurrencies (and DeFi in particular) are at risk of massive government interference. Regulators cannot completely shut down blockchain systems. They can, however, declare the use and possession of cryptocurrencies illegal. This would create a legal crime for the remaining users. Even if the crime was difficult to prove, it would still deter users. Additionally, the crypto ecosystem would lose all institutional investors. However, such a strict intervention in the economy could be met with resistance. Thus, measures weakening crypto will be more likely. There could be increased taxation on the capital gains of cryptocurrencies. Taxes could also rise on the interest generated via DeFi platforms.

Governments disapprove of DeFi’s lack of KYC measures for identifying their customers. This creates a risk of dApps functioning for money laundering and other illegal transactions. However, it is questionable whether these regulatory measures are justified. They may only exist to prevent governments from losing their monopolies over money. The Crypto Crime Report by Chainalysis shows only a small degree of illegal activities. 0.34% of transactions on the crypto market can be attributed to illegal purposes. In the traditional financial system, this figure is over 2%.

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