The popular slogan is "the same activities, the same risks, the same rules". In other words, control should be consistent. It looks very intuitive, and is also applicable to many traditional products that appear to be similar to the Web or other services on the surface. Web3 application. The following content will answer for you.

1、 Web III is the policy objective of application supervision

Because of Web3 applications and protocols with different functions and risk situations, most of the slogans fail on the Web. Therefore, we should pay attention to the policy objectives of specific laws and regulations to understand whether this distinction between function and risk is necessary. The third is to adopt different supervision methods.

A law and regulation can achieve many different policy objectives. Legal objectives may include: protecting investors and consumers, promoting innovation, promoting capital formation and capital market efficiency, stimulating competition, protecting national interests, etc. However, sometimes control does not achieve its purpose, or even has no legal purpose. This may be because some kind of control is beyond its original purpose, because its scope of application is too wide, or because it has produced unexpected adverse effects, or because the application of this kind of regulation will deny the technical value it needs to regulate.

Under these premises, the continued application of a law and regulation may be to protect the deep-rooted interests. Or it is just for control and supervision, which are obviously unacceptable. With the technological progress represented by 3, any one-size-fits-all regulatory method will be as outdated as this method, and will probably be eliminated soon, which will greatly weaken the legitimacy and effectiveness of control actions.

2、 Why should it apply to Web3 applications?

Compared with Web3 applications, the monitoring of protocols will lead to similar absurd results. Just as cars speed up travel, the new computing paradigm driven by Web3 technology enhances the local new form of Internet functionality. The ability to transfer value at the speed of the Internet is an extremely powerful primitive ability, but this ability is still in its infancy. If regulators want the Web3 agreement to stipulate subjective and global conflicts, compliance may require the development team to experience an impossible regulation. The process of "re concentration" creates the illusion of governance, command and control. Although regulators can understand and find the central point of control and responsibility, the governance of blockchain agreements is generally globally distributed and decentralized. Pretending not to do so or forcing this kind of governance to be centralized will have a negative effect, and destroy it.

To achieve true "technology neutrality", control should not destroy the technology it needs to monitor. This is the main reason why control is only aimed at its Web3 application, not the underlying protocol, because the former is operated by enterprises and can be formulated according to subjective rules, while the latter is essentially software and cannot be formulated according to subjective rules. Similar arguments are further established in the technology stack to ensure the underlying functionality. Luddism is not so much a law as a regulation that destroys the value of technology.

You can build a system with permission based on the system with permission, but you cannot build a system with permission based on the system with permission. Unless the society is 100% sure that you do not need to go to the permission system, you need to establish the permission system at the bottom, because of this reason. Decentralization is one of the key advantages of blockchain technology and has a great impact on regulation. Critics often make fun of decentralization as an excuse, but blockchain decentralization is real and a major event.

In DeFi, traditional financial services are dismantled, and no intermediary can be trusted. Therefore, in the real DeFi, the decentralization, transparency and distrust brought by blockchain technology eliminate many CeFi laws and regulations mainly to solve most risks. By eliminating trust and dependence on intermediaries, DeFi can keep users away from CeFi. Many ancient malfeasance behaviors are common in China, and it is better than all the "self control" or "public control" systems in CeFi.

Therefore, it is illogical to apply all laws and regulations of CeFi to decentralized Web3 applications that do not provide similar intermediary services. In addition, any control intervention will be counterproductive. Control intervention will prevent DeFi from achieving the very legitimate policy objectives pursued by many financial regulations, such as transparency, auditability, traceability, and responsible risk control. It should be resolute to resist such regulation.

Even so, because such control may have multiple implicit policy objectives, it is difficult to completely eliminate each control even in the field of financial services and control focusing on intermediaries. The scope of IB law is different. Through IB law, CFTC focuses on how conflicts of interest affect the transactions of intermediaries without retaining investors' assets. The decentralization of Web3 technology obviously avoids the need for legal custody of BD, but it may not prevent it independently. IB Especially when the law requires, DeFi makes decisions on behalf of customers.

If it involves a large number of laws and regulations that may be applicable to Web3 applications, it should have clear relevant purposes, appropriate scope and effective supervision effect. The above classification methods and problems are the bottom line of analysis: how to operate DeFi must be understood from a subtle perspective. When starting their blockchain learning journey, every sincere regulator has learned that the homogeneous naming of traditional finance and blockchain finance hides the deep-seated differences in operation, organization and function.

summary

To sum up, if the same risks and considerations apply to centralized and decentralized businesses and technologies, the default position may be that if there are no overwhelming policy objectives to justify different rules, then these rules should be consistent. This regulatory framework can make companies using decentralized agreements have more obvious competitive advantages than centralized transactions, and lead to regulatory arbitrage. Therefore, the difference in this approach requires a convincing policy objective to prove the breakthrough in promoting decentralization.