Thailand Security and Exchange Commission (SEC) has issued a warning in the state regarding the risks associated with DeFi transactions. The SEC says it is highly-likely that DeFi’s ecosystem, especially debit-taking and lending firms, doesn’t include necessary parameters in their mechanisms for ensuring the prevention of overleveraged collateral and rug-pull.
Though the cryptocurrency has experienced immense growth in the past few years, it has also indicated to the global security supervisors to govern it. While the crypto-space turns cyber criminal’s favorite target with Terra’s collapse intensifying the situation.
The SEC issued a statement on Wednesday, August 17th, in which the Officials called the DeFi transactions as risk. As mentioned above they noted that the DeFi industry is devoid of mechanisms that are responsible for ensuring the system’s efficiency. Further the officials advised the investors to research any DeFi programme before entering the space since the financial and capital market regulators don’t regulate the lending and deposit taking services in Thailand.
The working of a DeFi firm doesn’t include any third-party counter to look after the system. The decisions are made through an applied mechanism over meeting the specific terms and conditions.
The regulator also added that there are several risks in DeFi firms. Among which are risks from the products and services which could be complicated. Further commenting on risks, the watchdog warned that cryptoassests could outperform collaterals and may not receive expected return on investment (ROI) and cash back.
According to the SEC’s filing, DeFi projects become even more risky due to their technical and security risks. For instance, a project developer can run away with investors’ cash hence making their native cryptocurrencies invaluable , basically a rug-and-pull case. Many-a-times investors are lured with high ROI and they do not do proper research. In general also, it is highly advised to do your research before investing in any kind of asset.
Source: https://www.thecoinrepublic.com/2022/08/22/thai-sec-warns-thailand-investors-of-defi-transactions-touting-them-as-risky/