Opinion by: Hedi Navazan, chief compliance officer at 1inch
Web3 needs a clear regulatory system that addresses innovation bottlenecks and user safety in decentralized finance (DeFi). A one-size-fits-all approach cannot be achieved to regulate DeFi. The industry needs custom, risk-based approaches that balance innovation, security and compliance.
DeFi’s challenges and rules
A common critique is that regulatory scrutiny leads to the death of innovation, tracing this situation back to the Biden administration. In 2022, uncertainty for crypto businesses increased following lawsuits against Coinbase, Binance and OpenSea for alleged violations of securities laws.
Under the US administration, the Securities and Exchange Commission agreed to dismiss the lawsuit against Coinbase, as the agency reversed the crypto stance, hinting at a path toward regulation with clear boundaries.
Many would argue that the same risk is the same rule. Imposing traditional finance requirements on DeFi simply will not work from many aspects but the