see the rapid growth of DeFi protocols catching the attention of traditional finance ( TradFi ), as it is proving its ability to unlock areas that have been untapped by TradFi . Specifically , DeFi is influencing new approaches , and creating greater expectations of capital and how innovative financial transactions can benefit stakeholders and end users . More traditional institutions are building teams and divisions to research , test and deploy financial applications on the Blockchain , following industry peers like Fidelity and BNY Mellon , who started their journey before the crypto hype cycle began . The recent approvals of 11 Bitcoin ETF licence applications by the Securities and Exchange Commission ( SEC ) are an example of the evolving relationship between DeFi and TradFi . That moment was notable when the SEC , which has not been crypto-friendly , opened the ETF channel to Bitcoin holders .

DeFi may have a much smaller market share than TradFi , but it has captured the imagination of what the financial ecosystem of the future could look like . In a DeFi world , intermediaries are replaced with smart contracts , and governance structures are administered through DAOs . DeFi promises transparency , immutability , traceability and security . The security of transactions on DeFi has been tested by hackers presenting a challenge for regulators to quickly get up to speed . The International Organization of Securities Commissions ( IOSCO ) has been a global standard setter in developing policy recommendations and regulatory frameworks for DeFi . Because the current regulatory environment is uncertain in many jurisdictions , IOSCO ’ s recommendations that address market integrity and investor protection are crucial to understanding and mitigating global risks . I believe this early work and leadership by IOSCO is going to prove invaluable as DeFi continues its ascent .

In the US , regulators and policymakers are also working to understand the DeFi landscape and its potential impact on markets . There has been early work on defining and categorising decentralised finance . Regulatory agencies like the Commodity Futures Trading Commission ( CFTC ), have active committees comprised of industry experts , market participants , service providers , and regulators who recommend standards for the digital assets markets . I am a member of the CFTC Global Markets Advisory Committee ’ s Digital Assets Markets Subcommittee and our work is an opportunity to provide the CFTC with recommendations for a principles-based regulatory framework that addresses evolving technology and financial applications in this rising DeFi world . I believe regulators must keep pace with innovative FinTech protocols and applications and design regulations that do not stifle innovation . DeFi may have over 17,000 protocols and applications but this is just the beginning . We have an opportunity to shape a future that delivers the benefits of DeFi in an inclusionary way and this early thinking together can get us there . �

27