Hester Pearce: DeFi projects need real decentralisation

August 7, 2021

Hester Pearce: DeFi projects need real decentralisation

Full decentralisation from launch is the only hope for DeFi projects to avoid financial regulation. This is the view expressed by SEC Commissioner Hester Pearce, known as "CryptoMama".

In a conversation with DeFiWatch founder Chris Bleck on The Defiant's YouTube channel, the commissioner noted that decentralised organisations and DeFi are new concepts for regulators. Systems without centralised intermediaries are very different from what they have usually had to deal with, she added.

"If you want to be decentralised, you really need to be that way and it will put you in a different category from the regulators' point of view because it's just not something we've dealt with before," said Pearce.

She stressed that if the regulator can find an element of centralisation, it will definitely catch on.

"So I think it's not a bad thing to be cautious in creating your own things, because it could have regulatory implications in the future," the SEC spokeswoman said.

According to her, the existing rules are designed in such a way that all players involved in the financial sector are subject to one rule or the other.

"If you want to prove that you are something different from the CeFi or TradFi system, then you have to show that you are doing something radically different, and that, in my view, requires decentralisation," said Pearce.

She noted, however, the danger of "shadow centralisation" in the DeFi sector, where groups of developers or investors control the protocol thanks to the opaque governance structure.

As a reminder, Pearce has previously urged DeFi developers to contact the SEC to avoid regulatory infringement in each case.

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About the author

Hi there, my name is Zalman Weinberg. I'm enthusiast with over 7 years of experience in cryptocurrencies and blockchain. Professional Trader providing Blockchain solutions to Startups and Enterprises. Expert in all cryptocurrency exchange APIs (BitMEX, Bittrex, Binance, Bitfinex, Kraken, Poloniex, Gdax etc.). I have also worked with multiple Forex broker APIs.

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