DeFi — the ‘Wild West’ of crypto — is next on regulators’ hit list – CNBC

DeFi — the ‘Wild West’ of crypto — is next on regulators’ hit list – CNBC

Jakub Porzycki | NurPhoto | Getty Images

The fast-growing decentralized finance industry could be about to get a rude awakening.

Decentralized finance, or “DeFi” as it’s commonly referred to, is a trend in cryptocurrencies that first started gaining traction in 2020.

It’s been called the “Wild West” of crypto — hoards of computer programmers trying to bring traditional financial products such as loans to the blockchain.

The idea sounds promising. In theory, anyone could lend and borrow digital money at competitive interest rates, with no middle men involved. Investors are lured by the promise of earning up to double-digit percentage yields on savings in certain digital tokens.

But with major hacks and scams plaguing the space this year, regulators are becoming increasingly worried about the risk of crime as well as harm to consumers.

“I think they’re going to pay more attention to the space,” Sid Powell, co-founder of DeFi lending platform Maple Finance, told CNBC.

Almost $90 billion has been deposited into Ethereum-based DeFi protocols so far, according to data from The Block.

“It’s probably inconceivable that you have meaningful growth of DeFi which does not need to complement existing regulation in future,” Powell said.

Regulators have already started taking a tougher approach to the crypto industry.

Various countries have attempted to boot out Binance, the world’s largest digital currency exchange, for operating without their authorization. Since it has no official headquarters, Binance has so far managed to