DeFi transactions are considered unsafe by the Securities and Exchange Commission of Thailand (Thai SEC), which has warned local cryptocurrency investors to exercise caution while using them. The watchdog claimed that regional authorities had no control over the developing sector.
The financial and capital markets watchdog claimed in a statement on Wednesday that DeFi services, particularly deposit taking and lending services, have gained popularity. However, these solutions pose a risk because DeFi platforms could not have a way to control actions that implement smart contract requirements.
As per the statement from the Thai SEC, investors are urged to investigate any DeFi scheme before joining “as deposit taking and lending services are not regulated by the financial and capital market regulators in Thailand.”
The warning from the Thai SEC comes after local users’ withdrawals from the cryptocurrency exchange Zipmex were halted on July 21. The exchange later was seen seeking bankruptcy protection, as TheCoinRise reported.
DeFi TVL falls considerably
A Chainalysis analysis states that 97% of the $1.7 billion in digital assets that were taken between January and May belonged to DeFi. According to a DappRadar analysis from May 13, its total value locked fell to $83.4 billion, down 48% from the start of the year, with the majority of the decrease (almost 40%) occurring in the last week.
DeFi tokens were dumped as a result of the massive outflow of investors from DeFi to stablecoin and then to fiat during the market crash that lasted from May to July. Industry reports claim that the sector’s market capitalization fell 75% in Q2, from a nominal $142 billion to $36 billion in just three months.
In addition, the SEC statement claimed that the agency intends to evaluate the rules governing the regulation of digital assets and made it clear that it opposes DeFi operations, which include lending and deposit-taking, in either centralized or decentralized finance.