The EU plans to automatically read blockchain data to control the DeFi market

As a pioneer in the development of the General Data Protection Regulation (GDPR), the European Commission also intends to be at the forefront of rules that could govern the decentralized financial world.

In a recent report, the EU executive body announced that it will be piloting an automatic form of supervision for DeFi (decentralized finance), which is largely unregulated today.

«Adapting the EU’s financial services regulatory framework to the [децентралізованого] environment will require rethinking,» the report says. This year, a pilot project on «automatic supervision» will be launched to «extract value from the inherent transparency of public blockchains.»

The result will be a high-tech solution in which supervisory authorities «automatically monitor compliance with the regulatory framework by reading transaction data in the blockchain. Thus, market participants do not need to «actively collect, verify and transmit data to supervisory authorities» — as is currently the case in the financial system.

European Commission staff also emphasize that DeFi «has the potential to increase the security, efficiency, transparency, accessibility, openness and interoperability of financial services» compared to TradFi, especially when it comes to cross-border payment settlements.