The World Economic Forum recommends conducting DeFi-related innovations and experiments within regulatory sandboxes to improve transparency and risk management.

Sandbox Approach as a Driver for DeFi Innovation

The WEF notes that countries adopting a 'sandbox-first' approach show progress in DeFi innovations, allowing controlled experimentation with digital assets. The report highlights: 'The success of regulatory sandboxes highlights the potential for collaborative innovation in DeFi.'

WEF's Approach to Risk Mitigation

The forum stresses the importance of collaboration between regulators and DeFi platforms for consistent risk communication. Licensing models that consider the decentralized nature of DeFi have facilitated progress. The report also points out misalignments between traditional financial regulations and decentralized economies.

Regulatory Barriers and Blockchain Initiatives

The European Blockchain Sandbox Initiative recently onboarded 41 authorities and regulators from 22 countries to participate in its second cohort. The project aims to provide a framework for dialogue and identify legal and regulatory obstacles to blockchain innovation.

The WEF calls for sandbox environments to foster DeFi innovation and develop compliant ecosystems. The forum also highlights the need for consumer protection and maintaining market integrity through calibrated requirements.