Florida’s Office of Financial Regulation (OFR) has issued a warning about decentralized finance (DeFi) based companies that offer lending, banking and investment services.
- The OFR is cautioning the public that before using any DeFi-based service, it is important to do the necessary due diligence and understand what DeFi is in order to avoid becoming the victim of a scam.
- The state regulatory body warns the DeFi investment market is still new, highly volatile and driven mostly by psychological factors rather than investment fundamentals.
- DeFi is one of the fastest-growing sectors of the crypto industry, with $92 billion worth of assets currently locked in peer-to-peer powered protocols – up 196% over the last year, as reported by CoinDesk.
- Scams, rug pulls, exploits and fatal code errors are among the biggest risks associated with using DeFi platforms.
- The OFR defines DeFi as financial services provided by an algorithm on a blockchain, without the involvement of a traditional financial services company.
- “Before getting involved with a company or product in the DeFi market, take reasonable steps to understand the risks of this emerging blockchain-based technology and market,” OFR Commissioner Russell Weigel said in a statement.