Investor protection: a regulatory strategies comparison

Abstract

DLT and several other technological elements such as smart contracts, digital wallets, oracles, and so on in the context of financial markets, are leading to the emergence of very different phenomena which require, first of all, to be understood and then, inevitably as their importance and volume grow, regulated and supervised, to ensure the stability of the market and the protection of its investors. At the international level, the Financial Stability Board is advancing a global regulatory framework grounded in the principle of ‘same activity, same risk, same regulation’, aiming to ensure consistent and comprehensive regulation of crypto-asset activities and stablecoins relative to the risks they present, while also fostering responsible innovation prompted by technological advancements. The European Union is actively addressing regulatory challenges in the crypto space, employing distinct approaches to different categories of cryptoassets, depending on whether DLT technology is used in the context of non-fully decentralized finance, rather than in DeFi itself, which currently lacks effective regulation within the European Union. Greater problems from a regulatory perspective, however, are posed by the phenomenon of DeFi, which entails a more significant disintermediation. For this reason, even at the European level, this is undoubtedly the area that poses the most significant problems for market and investor protection. Keywords: decentralized ledger technology, crypto-assets, regulation, DeFi, investor protection.