At the peak in May, over $80 billion in digital assets were locked into Decentralized Finance, or DeFi, applications (i.e., MyEtherWallet and BurnerWallet) generally as liquidity or collateral supporting various services. Due to this new phenomenon, DeFi became a major development in global finance. However, many policy makers and other individuals struggled to understand the details of this new development. Therefore, The World Economic Forum decided to partner with Professor Kevin Werbach from The Wharton School at University of Pennsylvania to create the Decentralized Finance (DeFi) Policy-Maker Toolkit.
The Decentralized Finance (DeFi) Policy-Maker Toolkit was crafted to provide guidance about global technologies that are transforming rapidly. The whitepaper describes the key elements of the DeFi ecosystem, while the toolkit provides worksheets and tools for policy makers to develop effective responses in the market. Most importantly, the kit gives an overview of what exactly DeFi is to help people understand this new concept and how it can impact individuals’ finances.
As of right now, it is unclear how DeFi will continue to be used. The biggest use of DeFi is still speculative in cryptocurrency investments. For DeFi to become mainstream in the finance industry, it needs to address the needs of mass-market investors, which also means providing the reassurance and friendly-user experiences the general population expects.
The toolkit has already proven to be an asset to many people in the financial industry. Michael Mosier, Acting Director of the Financial Crimes Enforcement Network (FinCEN) in the United States, said “This report helpfully provides us [FinCEN] with a thoughtful, clear, and comprehensive cartography of DeFi so that we can make the most of truly innovative opportunities for financial expansion and novel risk mitigation.”
Click here to access the DeFi toolkit.