This article argues the decentralized finance (“DeFi”) markets from a regulatory perspective. The paper first describes DeFi’s basic concepts and regulatory challenges, along with its development history since the 2010s. The authors discuss hypothetical use cases to demonstrate the necessity of more stringent regulations over DeFi (e.g., initial DEX offering, cross-chain bridges). The report also suggests ideas for building new regulations with an emphasis on a “balanced approach” between supporting innovation and mitigating risks. It concludes that international cooperation among regulators and DeFi stakeholders is essential to enable the healthy growth of the industry.
