DeFi Pioneer Echoes SBF calls for stricter crypto regulations

Respected former founder and developer of decentralized finance (DeFi) project Andre Cronje has re-emerged after a long hiatus to call for tighter regulations on the crypto sector amid the explosion of several firms this year.

The comments echo similar sentiments to FTX CEO Sam Bankman-Fried (SBF), who also called for stricter industry standards for digital assets last week, including greater consumer protections, transparency and disclosures.

However, SBF was met with strong backlash from society, with many people accusatory CEO to try to monopolize or censor the DeFi space, among other things.

In an Oct. 25 blog post titled “Crypto Winter 2022,” Cronje called for greater regulation of the sector, noting that “the recent downturn in the crypto market has shown the flaws in the system and the need for regulation to prevail. in irresponsible actors and protect consumers.”

Cronje added that it had been a bleak year for the crypto sector as he pointed to the collapse of the Terra LUNA ecosystem and several crypto firms – particularly crypto lenders, which have left consumers reeling:

“The resulting issues that appear to be most problematic are where users’ cryptocurrencies are locked up in accounts handled by exchanges, or where the management of their funds is left in the hands of others.”

He went on to call for greater consumer protections, especially when it comes to crypto exchanges and crypto investment service providers, highlighting the complex case of users getting their money back from the ongoing Celsius bankruptcy case.

“Remedies under the current regulatory regime are ineffective. Most investors sign away their rights to their crypto exchanges in voluminous terms and conditions of crypto exchanges, and many will (at best) rank as unsecured creditors if these exchange services are liquidated,” he wrote.

The former DeFi developer describes current solutions used in traditional finance that the crypto sector has yet to introduce, including deposit insurance, supervision and consumer remedies to “be able to approach the relevant supervisory authority, or at least use the overall legislation as a framework.”

Regarding deposit insurance, Cronje emphasized the importance of central banks worldwide following mandatory insurance practices to ensure that consumer funds are protected.

Related: US lawmakers question regulators about ‘revolving door’ with crypto industry

Under such practices, it generally means that people have a viable and relatively straightforward way to get their money back, unlike in the case of Celsius.

“The safety net of deposit insurance is a means available to consumers in traditional banking that is not available to depositors in crypto exchanges (like Celsius),” he wrote.

In terms of supervision, Cronje said that overarching authorities in the sector could improve confidence in crypto, such as the case of central banks supervising private banks on factors such as “capital, asset quality, sound management, earnings, liquidity and risk sensitivity.”

Cronje is seen as one of the most influential figures in the DeFi movement, due in part to the launch of Yearn Finance in 2020 and his work on several other DeFi protocols. In March, however, he announced that he is stepping away from working in the industry altogether.