To Hedge Risks, Hong Kong SFC Requires Licensed And Regulated DeFi Projects

DeFi is open source in the hope that the wider community might discover vulnerabilities, but it is open source that could allow attackers to figure out how to exploit it.

The US risk assessment has pointed to several major hacks and incidents in DeFi over the past few months, such as North Korea’s use of DeFi for money laundering and other related concerns about how DeFi projects may not meet customer needs/resist money laundering (KYC/AML) rules or are vulnerable to theft.

The US report said: “This vulnerability could be more complicated if smart contracts are not carefully written, or if they lack a mechanism to deactivate or change quickly if a critical vulnerability is identified and determined.” “Therefore, it is important for DeFi services to identify and address potential vulnerabilities and exploits in open source code.”

However, the report still shows that Defi is an essential area in developing cryptocurrencies. Recommendations include “strengthening existing monitoring and enforcement actions” to meet regulatory requirements for better participation in private sector projects.

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