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Co-founder of the DeFi project Unstoppable Finance, Peter Grosskopf, tells to Coincrypto Deutsch what he thinks about new DeFi laws.
The European Commission, the European Parliament, and the Council of Ministers are currently engaged in a trialogue for the Markets in Crypto Assets (MiCA) and Transfer of Funds (TFR) legislation, which will be completed in a few weeks.
According to analysts, if enacted, the TFR will impose a massive financial monitoring regime on the European decentralized finance (DeFi), nonfungible token (NFT), and metaverse areas. Companies in those areas may then relocate in order to dodge regulation.
The German DeFi community has not been silent, and supporters can sign an open letter to EU decision-makers. Peter Grosskopf of Unstoppable Finance, who was also a co-founder of Solarisbank in 2017, is one of the numerous initiators. Grosskopf was the chief technology officer at the Stuttgart Digital Exchange before co-founding his own DeFi project with Maximilian von Wallenberg and Omid Aladini last year.
Cointelegraph auf Deutsch chatted with Peter Grosskopf about how DeFi intrigues him, his thoughts on the proposed TFR laws, and how the German DeFi community is feeling right now.
"Almost everything we do now with a bank, we can do ourselves with DeFi applications," Grosskopf told Cointelegraph, adding that "a whole modern and global infrastructure is forming that is not only operational in Europe, North America, or Asia, but globally."
DeFi tokens contain various interoperability features, such as allowing multiple systems to work together "and, thus, the new global financial system functions uniformly and decentralizedly." Grosskopf believes that the traditional financial world will never be able to do so.
DeFi is not understood by regulators
However, not everyone is as enthusiastic about DeFi as Grosskopf. "The European DeFi market has political issues and a lack of knowledge," he said. As a result, the European Union Parliament voted on the TFR, which Grosskopf believes is unjust because crypto is subject to tighter regulations than the traditional financial industry:
"Politicians are people's representatives; they are elected to represent our goals, interests, and viewpoints." However, DeFi has absolutely no lobby, which is why few people have spoken to lawmakers about how DeFi is evolving and the benefits that decentralized financial systems may provide. But let's put an end to this now. European DeFi players, creators, and protocol developers must become more active and visible."
Grosskopf believes that if regulators better understood the benefits of DeFi through fully transparent record of transactions that are publicly retrievable and can be statically reviewed and audited, they would reconsider.
A digital identity, which represents a person or business in the digital domain, is one of the benefits of blockchain, according to Grosskopf. He claimed that a type of digital identity could be held in an unhosted wallet, and that if the user was required to establish his identity in a digital procedure, he could do so securely using the generated data. "However, in this case, you need an actor to verify whether this identity was generated and is authentic," Grosskopf explained:
"And, in my opinion, such solutions are required: to respond to legislative obligations with technology and, if possible, to develop our own DeFi industry standards."
He also mentioned that there are issues that need to be addressed, such as usability and consumer protection, and that the DeFi community needs to start talking to regulators and politicians in order to persuade them that DeFi is transparent and, as a result, less vulnerable to political or corporate influence and corruption.
Finding your voice
The DeFi group was initially upset with the vote outcomes after two important EU Parliament committees voted for TFR. However, "there is a productive spirit in which we want to convince everyone of the prospects DeFi provides."
"However, to be honest, the DeFi field is rather new and is underrepresented in blockchain associations." That is why we will make an effort to be heard."
Grosskopf has referred to himself as a crypto realist for years because of his experience at Solarisbank in both the old and new worlds. Grosskopf argues that regulation in general is becoming increasingly stringent. "And it's not only in the cryptocurrency space." As a crypto realist, I believe we need to be proactive as a community and develop our own solutions before they are imposed from elsewhere."
"They want to protect us, yet they're doing the exact opposite."
In the traditional financial industry, not every transaction is reported to the authorities; rather, only suspect transactions are reported. In the crypto world, the present version of the TFR would require banks and payment companies to preserve information on any transaction that exceeds the 1,000 euro level, even if it was for something as mundane as an Apple laptop. According to Grosskopf, this constitutes an invasion of privacy:
"Purchasing a laptop is not illegal or questionable. But I find it insane that every purchase of an article or service worth more than 1,000 euros is recorded someplace, together with my name, all of my contact information, and my registration address. This data can slip into the hands of anyone, including hackers and criminals, who can then examine what you own and your address."
Grosskopf believes that the TFR is illogical in terms of data protection. "It also has little effect on preventing money laundering." They intend to protect us with it, yet they are doing the exact opposite."
Web3 firms may relocate outside of the EU
According to Grosskopf, if the TFR is implemented, it will stifle the development of European enterprises, resulting in less capital flowing into the Continental DeFi sector. This will result in slower growth in the DeFi sector and make Europe less appealing as a market:
"I see only bad implications: clients will increasingly turn to foreign providers, which will have terrible ramifications for European service providers' competitiveness." After all, it has a significant impact on where new businesses are founded and where they are located."
According to Grosskopf, Switzerland is the most apparent destination for DeFi businesses, but under specific conditions, more companies will be founded outside of Europe. Then, European policy will accomplish the inverse: the DeFi market will be beyond the field of influence of European policy, resulting in "negative effects for the purpose of combating money laundering."
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