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EU Markets Regulator Warns of DeFi’s ‘Serious Risks’

The European Securities and Markets Authority (ESMA) warned of "serious risks" of investors being harmed by decentralized finance (DeFi) in a Wednesday report despite the innovative technology being in its infancy. ESMA, an EU agency that is due to set rules under the bloc’s landmark Markets in Crypto Assets Regulation (MiCA), promised to look further into the nascent market, which has posed a puzzle for policymakers who are used to pinning regulatory obligations on centralized entities like banks or securities exchanges. ESMA last week proposed a swathe of new rules for crypto asset service providers under MiCA, such as the environmental disclosures that will need to be included in issuers’ white papers.

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