France’s banking and insurance regulator, the Autorité de contrôle Prudentiel et de résolution (ACPR), has published summary of its findings from a public consultation on the regulation of decentralized finance (DeFi.)
The consultation received significant engagement from global DeFi stakeholders, providing valuable information to inform potential regulatory approaches in Europe.
According to the ACPR, the two-month consultation enabled a deeper understanding of the risks and opportunities of DeFi. While DeFi is often described as “decentralized,” the regulator argues that “disintermediate” may be more accurate given the concentration of infrastructure with large cloud providers, which represents a potential operational vulnerability.
The consultation also revealed broad support for the certification of smart contracts, core DeFi protocols, with proposals on proportionality and incident reporting. Regulation of mediators and user interfaces also received broad consensus.
Most participants supported continued development on public blockchains while enhancing resilience. The feedback will help shape ACPR’s contributions to European regulatory discussions under the Cryptocurrency Markets Act (MiCA), focused on issues such as:
- The rules governing the trustworthiness of the blockchain are critical to DeFi.
- Smart Contract Certification Frameworks.
- Governance and Conduct Standards for DeFi Platforms.
According to the ACPR, regulation of infrastructure, smart contracts and businesses will allow DeFi to grow while protecting consumers. Crypto natives and established financial institutions submitted comments along with auditors and advisors, providing different perspectives.
While MiCA provides the foundation, the regulator believes further rules are needed for the unique nature of DeFi and token funding. The consultation allowed the drafting of specific recommendations for the expansion of the regulatory perimeter.
The DeFi concentration problem continues.
ACPR’s sentiment that DeFi has a hardware centralization problem is shared by some within the crypto community itself, as the data shows. In July 2022, CryptoSlate reported that Amazon AWS facilitated about 32% of Ethereum nodes at the time, with 47% of total nodes running through major US internet and cloud providers. Analysts at the time argued that the network’s reliance on companies like AWS could allow coordinated attacks between providers to disrupt operations.
The graphs below show the distribution of Ethereum nodes by provider in July 2022 and October 12, 2023. Currently, 52.3% of nodes are running on hosting services, an increase of 5.3%.
According to most recently data, Amazon now has the majority of hosting hosts after increasing its market share by around 6% over the past 15 months to 49.19% from 43.27% in July 2022.
UPDATE: The items in the ethernodes charts don’t seem to match those in the tables. The analyzed data follow the table.
