The Thai Securities and Exchange Commission (Thai SEC) has asked cryptocurrency investors in the country to handle DeFi transactions with caution, saying it carries risks.
Regulators argue that local regulators cannot control emerging industries.
Popular but not fully proven
Financial and capital markets regulator in a Wednesday DeFi services have become popular, especially deposit and lending services, the statement said. But these services are risky, as there may not be a mechanism in the DeFi platform to control the operation of enforcing the terms of the smart contract.
” Therefore, investors are advised to research any DeFi initiative before joining…as a deposit and Lending services are not regulated by Thailand’s financial and capital market regulator,” the media report quoted Thailand’s SCE as saying.
Further enumerating the risks, the regulator pointed to over-leveraged collateral and a lack of Accurate operating information, conditions and features of the Investors may expose investors to exploitation. It added that DeFi platforms attract investors to trades with high returns, but there are also potential risks, including the possibility of pulling the rug.
Thailand’s SEC warning comes after cryptocurrency exchange Zipmex stopped withdrawals for its local customers on July 21 . Zipmex’s decision stems from liquidity issues unwinding from its $53 million exposure to troubled lending platforms Babel Finance and Celsius Network.
Echoes the current DeFi recession
According to the Chainalysis report, From the beginning of the year to May, 97% of the $1.7 billion in stolen digital assets belonged to DeFi.
DappRadar’s May 13 report said that the total value locked in DeFi fell to a notional $83.4 billion, a decline since the beginning of the year 48%, the majority of the decline (over 40%) occurred in the past 7 days.
During the May-July market crash, a large number of investors switched from DeFi to stablecoins to fiat, resulting in a sell-off of DeFi tokens currency. According to industry reports, DeFi’s market capitalization fell from a nominal $142 billion to $36 billion in the second quarter, a 75% drop in three months.
Thai regulator plans to review
SEC statement It is also claimed that the regulator is planning to review the digital asset regulatory guidelines and clarify that it does not support DeFi transactions in centralized or decentralized finance – deposits and lending.
It is also discussing the matter with other stakeholders to determine regulatory guidelines to protect investors.
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