Sunday, September 25, 2022
HomeDeFiDeFi switch to DAO governance to avoid regulatory risks: Report

DeFi switch to DAO governance to avoid regulatory risks: Report

KuCoin Labs predicts in its annual report that "if DeFi's goal is to reduce regulatory risk, the form of DeFi governance will gradually evolve into a DAO".

KuCoin Labs, the investing and research department of crypto exchange KuCoin, has predicted its annual report that decentralised finance (DeFi) will continue to be a prominent trend in the crypto market in 2022, and that governance would be managed by decentralised autonomous organisations (DAOs).

With criminal whales continuing to plague the DeFi ecosystem, the risks of money loss inside the sector are becoming more evident. As a result, requests to regulate decentralised finance began to circulate in 2021, and the industry has begun to face enforcement proceedings in the last year. As regulators tighten their grip on DeFi, KuCoin Labs predicts that the sector will move to DAO governance to mitigate regulatory risks.

According to KuCoin Labs, a DAO that prioritises community interests, may carry out “real governance decentralisation.” As a result, the exchange predicts that the sector will see a shift in DeFi governance being managed through various means. KuCoin Labs also indicated that the core operating concepts of DAOs are sound enough to serve as the foundation for the formation of legal organisations. 

While the sector may not see a breakthrough in DAO expansion in the coming year, the research states that improving their processes may pave the way for their acceptance by enterprises and corporations as well.

Meanwhile, the blockchain-based protocol Syndicate recently reported the creation of 450 new DAOs on its platform in just three weeks. It says that this accounts for 10% of all DAOs in existence.

Vaishali Goel
Technology enthusiast, explorer and academic scholar. Currently exploring the crypto world. Join me in my journey to see how crypto, NFT and Metaverse will change the world.
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