Crypto Veteran Erik Voorhees Addresses US Lawmakers, Says Regulators Don’t Understand Decentralized Finance
Erik Voorhees thinks the high-profile collapse of the crypto exchange FTX further demonstrates the virtues of decentralized finance (DeFi).
In a new blog post, the crypto veteran argues that DeFi has already solved “the problem of trust” in financial markets.
“Isn’t that wonderful? With DeFi, financial transactions are transparent, not just to government regulators, but transparent for the entire public to see and learn from (or is that not good when the public can know things, too?).
With DeFi, accounts are transparent. Transfers are transparent. Trades and even complex financial derivatives are transparent. Balances are proven cryptographically. The code that executes these transactions is open-source, anyone can review it or suggest changes!”
Voorhees says the “opaque fraud” that brought down FTX could never happen in DeFi. He also says decentralized finance is immune from the “re-hypothecation” that crashed embattled crypto lender Celsius Network this past summer, as well as problems that have plagued traditional finance in the past.
“The complex derivatives and custody issues which froze financial flows in 2008, back when safe, regulated financial institutions had no idea who owned what and markets collapsed under the layers of counterparty risk… these would not (can not!) happen in DeFi.
And yet what have many regulators done in response to this suite of miraculous technology that was built by brilliant, determined, principled engineers over the past decade? Have they even learned how to use it? How many of those drafting crypto laws have ever actually executed a DeFi loan?”
Voorhees calls on regulators to pause and consider whether they actually understand DeFi before attempting to regulate it.
“Yes, DeFi removes some of your power as regulators… but it solves the problems you’ve been trying to regulate. Isn’t that more important?”
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