European Union Studies on Embedded Monitoring of Ethereum DeFi Indicate Regulatory Intentions


A tender by the European Union Commission to create “embedded supervision” of decentralized finance on the Ethereum blockchain was announced by Patrick Hansen, a Circle Policy Advisor via Twitter.

Hansen noted that “The aim is to study technol. capabilities for automated supervisory monitoring of real-time DeFi activity.” The estimated tender amount is €250,000, equivalent to $242,600, and the study’s completion time is 15 months.

Information about the study was disclosed via a contract announcement on the EU website. It requested that appropriately competent organizations launch a pilot study to create and evaluate technical options for “embedded supervision” of DeFi operations.

The warning emphasized “the open nature” of blockchain information and acknowledged that Ethereum is the most important settlement infrastructure for DeFi protocols.

The automated real-time collection of data from DeFi operations is being advanced by EU officials for supervisory oversight.

The technology that emerges from this project, according to Hansen, might have a significant impact, as it would improve the effectiveness of monitoring compliance and lessen the demand for additional parties to gather, verify, and send data to regulators.

DeFi is an anomaly in the cryptocurrency market because software protocols, which lack a central contact point, are unable to adhere to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations in a similar manner as CeFi networks.

This poses a challenge for international regulators charged with stopping the exploitation of financial systems for laundering money as well as other types of financial misconduct.

Shutting the door on financial criminals comes at the cost of the privacy of normal users, as evidenced by the latest hacking and leaking information of Celsius clients.