Opinion by: Hedi Navazan, Chief Compliance Officer at 1inch
Web3 requires a clear regulatory system that corresponds to bottlenecks of change and user safety to decentralized finances (DEFI). A size-sized-all-of approach cannot be achieved to adjust the defi. The industry requires custom, risk -based techniques to balance change, security and compliance.
Defi’s challenges and rules
One common criticism is that regulatory analysis leads to the death of the change, monitoring this situation back to the Biden administration. In 2022, uncertainty for crypto businesses increased following suits against Coinbase, Binance and Openea for alleged violations of security laws.
Under the US administration, the Securities and Exchange Commission Sumang -right to remove the lawsuit against CoinbaseAs the agency reverses the crypto bearing, indicating a path to regulation with clear boundaries.
Many argue that the same risk is the same rule. The imposition of traditional financial requirements in the defi will not work from many respects but the most technical challenges.
Being open, transparency, immutability, and automation are major parameters of the defi. Without clear regulations, however, the widespread issue of “schemes like Ponzi” can move the focus from effective cases of using a change in the formation of a “deceptive understanding” of blockchain technology.
Guide and clarity from regulatory bodies can reduce significant risks for retail users.
Policy manufacturers should take the time to understand Defi’s architecture before introducing restriction steps. The defi requires risk -based regulation models that understand its architecture and meet the forbidden consumer activity and protection.
Self frameworks plant transparency and security in defi
The entire industry greatly recommends implementing a self -regulatory framework that ensures ongoing changes while simultaneously ensuring consumer safety and financial transparency.
Bring an example of defi platforms that make a self -regulation approach by implementing stable security measures, including transaction monitoring, purse screening and implementing a blacklist mechanism that prevents a purse of suspicion with prohibited activity.
Sound security measures will help DeFI projects monitor onchain activity and prevent system use. Self -regulation can help defi projects work with more legitimate, but this may not be the only solution.
The clear structure and management are key
Institutional players no secretly wait for the green light regulation. Adding to the list of regulations frameworks, markets in crypto-assets (MICA) set measures for future regulations that may lead to the adoption of the DeFI institutional. It provides businesses with regulatory clarity and a framework to operate.
Many crypto projects will struggle and die as a result of higher compliance costs associated with MICA, which will implement a more reliable ecosystem by applying enlarged transparency from those who provide and quickly attract institutional capital for change. Clear regulations will lead to more investment in projects that support the investor’s confidence.
The anonymous crypto disappears quickly. Blockchain analytics, regulators and companies can monitor the weakening activity while maintaining user privacy in some size. The future adaptation of MICA regulations can enable solutions focusing on compliance with solutions, such as the following pool pools and blockchain-based verification.
Regulatory clarity may break the obstacles to the integration of defi
Bank iron banks are another significant barrier. Following officials often witnessed banks who built walls to maintain crypto. Bank supervisors are the distance of companies that are out of compliance, even indirect analysis or fine, the fall of doors to financial operations of crypto projects.
Clear regulations will address this issue and make a facilitator compliance, not a barrier, for integrating defi and banking. In the future, traditional banks will include Defi. Institutions will not replace the banks but combine Defi’s efficiency with the Tradfi structure.
Recently: Hester Peirce called for SEC rulemaking to ‘bake in’ Crypto Regulation
Staff Accounting Bulletin (Sat) 121 in January 2025 eases accounting burdens for banks to identify crypto assets held for customers as both possessions and responsibilities in their balance sheets. Previous laws have created barriers of increasing capital reserve requirements and other regulation challenges.
Sab 122 aims to provide organized solutions from reactive compliance with active financial integration – a step toward the creation of DeFI and Banking Synergy. Crypto companies should still follow the accounting principles and disclosure requirements to protect crypto assets.
Clear regulations may increase the frequency of banking cases, such as caution, backing back, asset tokenization, stablecoin issuance and offers accounts in digital asset businesses.
The construction of bridges between regulators and innovators in defi
Experts who are teaching concerns about over-regulation of killing the defi can now meet them using “Sandbox regulations.” Starting startups with a “secure zone” to test their products before making mandate regulations. For example, startups to the United Kingdom under the Financial Conduct Authority have evolved using the “trial and error” procedure that accelerates change.
They activate businesses to test change and business models in a real-world setting under regulator supervision. Sandboxes can be accessible to licensed entities, irregular startups or companies outside the financial service sector.
Similarly, the European Union pilot regime is advancing change and competition, which encourages access to the market for startups by reducing compliance costs through “doors” that align with legal frameworks at each level while upgrading modern technology.
Clear regulations can cultivate and support the change through open dialogue between regulators and constitutes.
Opinion by: Hedi Navazan, Chief Compliance Officer at 1inch.
This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.
