State of Crypto: How to Square Decentralized Finance With Regulatory Compliance

Are these 2 ideas compatible? That question directed a speech astatine this week's D.C. Fintech Week.

Oct 18, 2025, 2:00 p.m.

During D.C. Fintech Week successful Washington, D.C. this past week, I moderated a speech astir however decentralized concern (DeFi) projects could beryllium compliant with antithetic regulations.

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The narrative

Are developers liable for however their projects are used? Can they forestall criminals from utilizing their projects? In different words, is regulation-compliant decentralized concern an oxymoron?

Why it matters

Developers' liability for however their decentralized projects are utilized has already been the taxable of aggregate transgression cases successful the U.S. and elsewhere (see, for example, the cases against Tornado Cash developers Roman Storm and Alexey Pertsev). Without getting into the specifics of those cases, determination is simply a broader wide question arsenic to however overmuch developers tin bash to forestall malicious actors from utilizing their projects, and to what grade regulators tin plan usher rails for DeFi.

I was privileged capable to sermon this with Maha El Dimachki, the caput of the BIS Innovation Hub's Singapore Centre, Yaya Fanusie, planetary caput of Policy astatine Aleo, and Lee Schneider, wide counsel astatine Ava Labs, during a sheet astatine D.C. Fintech Week connected Thursday.

Breaking it down

Compliance and decentralized concern inherently dependable similar a contradiction. Users should beryllium capable to usage a genuinely decentralized protocol for immoderate purpose, and the project's developers should not person immoderate quality to interfere with these transactions. That's 1 theory, astatine least. Another is that developers are oregon should beryllium required to forestall unsafe actors from taking vantage of their projects.

Developers could and should beryllium capable to physique successful definite tools oregon features to guarantee compliance with definite regulations though, the speakers connected this sheet seemed to agree, with definite caveats.

The biggest of these caveats is that we request to travel up with a circumstantial statement statement connected however we're defining compliance here.

Fanusie said helium would picture developers' obligations much arsenic "risk management," focusing connected what issues they mightiness brushwood (alleged wealth launderers oregon different malicious actors, for example)

Schneider said that different mode of describing this is that neither developers nor regulators privation users to suffer their wealth (to astir paraphrase his comments). In that sense, some parties present are aligned successful their goals for DeFi.

And El Dimachki, who was antecedently astatine the UK's Financial Conduct Authority, said outcome-based policymaking, with regulators looking to forestall malicious enactment being the extremity of however they could attack rules astir DeFi. 

There seemed to beryllium wide statement among the panelists that determination are steps developers tin instrumentality to guarantee they're not moving afoul of regulations, but arsenic always, the devil is successful the details.

Obviously this is an ongoing debate, and I'm funny what you each think. I'd emotion to stitchery your thoughts connected the pursuing questions:

• Is compliant DeFi an oxymoron?
• DeFi implies planetary projects. Is it adjacent imaginable for a genuinely decentralized task to conscionable regulatory needs successful each jurisdiction it's operating in?
• If a task is decentralized and open-source, what's to halt a malicious histrion from gathering their ain front-end and tapping a protocol for their ain purposes? And should developers inactive clasp immoderate signifier of liability successful that scenario?

Feel escaped to respond to this newsletter oregon email maine directly with your thoughts. I'd emotion to person a follow-up speech astatine immoderate point. And of course, I'd similar to convey the bully folks implicit astatine the Fintech Foundation for inviting maine to beryllium a portion of this conversation.

Wednesday

• 14:00 UTC (10:00 a.m. ET) The House Financial Services Committee is scheduled to clasp a proceeding with national slope regulators. This proceeding was postponed connected Friday afternoon, aft House Speaker Mike Johnson announced the House would proceed to beryllium successful recess.

Thursday

• 14:00 UTC (10:00 a.m. ET) The Senate Banking Committee is scheduled to clasp a proceeding with national slope regulators. This is not the modular semi-annual oversight of prudential regulators hearing; it's titled "Update from the Prudential Regulators: Rightsizing Regulation to Promote American Opportunity" and arsenic of property time, appears to inactive beryllium acceptable to instrumentality spot arsenic scheduled.

If you’ve got thoughts oregon questions connected what I should sermon adjacent week oregon immoderate different feedback you’d similar to share, consciousness escaped to email maine astatine [email protected] oregon find maine connected Bluesky @nikhileshde.bsky.social.

You tin besides articulation the radical speech connected Telegram.

See ya’ll adjacent week!

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