Birgit Rodolphe, an executive director of Germany’s Federal Financial Supervisory Authority (BaFin), has urged for innovative and uniform decentralized finance (DeFi) regulation across the European Union (EU).

BaFin is the German financial regulator in charge of overseeing banks, insurance companies, and other financial institutions, including cryptocurrency exchanges. BaFin is in charge of issuing “crypto custody licenses,” which are essential for companies wishing to provide bitcoin services in Germany.

Rodolphe warned of the dangers of the uncontrolled DeFi space to consumers in an article on BaFin’s website, and urged for standardized regulatory considerations throughout EU member countries.

She listed “technical difficulties, hackers, and fraudulent behavior” as threats to consumers, claiming that DeFi isn’t as “democratic and selfless” as its supporters claim, and that DeFi devices are “difficult for many to grasp.” She came to the conclusion that DeFi protocols cannot operate outside of restrictions just because they employ new technologies.

“Utopia? Or rather dystopia? Who do I contact if I want to defer my crypto loan? What happens if my crypto assets suddenly disappear altogether? In any case, there is no deposit protection fund for such cases.”

She went on to say that lending, borrowing, insurance, and other non-traditional financial products are all subject to license and supervision where they’re offered, and she urged authorities to establish standards that will give DeFi providers legal certainty.

Rodolphe cited BaFin’s “crypto custody business” license, which was launched in January 2020, as a “attractive” regulatory framework for crypto enterprises.

The license allows businesses to provide cryptocurrency services in Germany. Only four suppliers have been licensed so far, but numerous financial institutions have applied. Rodolphe wrote that regulatory systems in different European countries should be the same:

“Ideally, such requirements would of course be uniform throughout the EU in order to prevent a fragmented market and to leverage Europe’s entire innovation potential.”