ARTICLE · 01 MARCH 2023

Decentralised Finance (DeFi) and the regulation paradox

Sajen Legal

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As the DeFi market grows governments work towards finding a regulatory solution that will aid in safeguarding their citizens.

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Decentralised Finance (DeFi) is, by design, separate from traditional institutions, mainly the government.

DeFi operates based on a community of investors seeing value in the financial instrument. This causes a problem for regulators, seeing as it is difficult to know who is investing and for what purpose without extensive investigation.

Since the invention of blockchain technology, the potential for these emerging technologies to be used for illegal activities has been no secret, with some speculating the popularity and value of the digital economy is on account of money laundering or financing terrorism or piracy. As the emerging DeFi market grows, and matures over time, governments will work towards finding a regulatory solution that will aid in safeguarding their citizens.

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