The Compliance Challenge in Decentralized Finance
At DC Fintech Week in Washington, a panel discussion tackled one of the most persistent questions in crypto: how decentralized finance projects can operate within regulatory frameworks. The conversation brought together experts from different corners of the industry, all wrestling with the fundamental tension between decentralization and compliance.
Maha El Dimachki from the BIS Innovation Hub’s Singapore Centre, Yaya Fanusie from Aleo, and Lee Schneider from Ava Labs joined the discussion, each offering distinct perspectives on this complex issue. What struck me was how everyone acknowledged the inherent contradiction in the premise—true decentralization means developers shouldn’t control how their protocols are used, yet regulators increasingly expect some level of oversight.
Developer Liability and Risk Management
The conversation naturally turned to developer liability, especially given recent cases like those involving Tornado Cash developers Roman Storm and Alexey Pertsev. These cases have put a spotlight on how much responsibility developers bear for how their creations are used. Fanusie suggested reframing the discussion from pure compliance to “risk management”—focusing on what problems developers might reasonably anticipate and address.
Schneider offered an interesting perspective that I think resonates with many in the space. He noted that both developers and regulators share a common goal: preventing users from losing money. This alignment, while perhaps not immediately obvious, provides some common ground for future discussions about regulatory frameworks.
Outcome-Based Approaches
El Dimachki, drawing from her experience at the UK’s Financial Conduct Authority, advocated for outcome-based policymaking. This approach focuses on preventing malicious activity rather than prescribing specific technical requirements. It’s a more flexible framework that might better accommodate the evolving nature of DeFi protocols.
What became clear during the discussion was that there’s no simple answer. The panelists generally agreed that developers can take steps to avoid regulatory problems, but the specifics remain challenging. Building compliance tools directly into protocols might be one approach, though this raises questions about how much control developers should retain over supposedly decentralized systems.
The Path Forward
Perhaps the most important takeaway was the recognition that we need clearer definitions and consensus around what “compliance” even means in the context of DeFi. Without shared understanding, developers and regulators will continue talking past each other.
This ongoing dialogue reflects the broader maturation of the crypto industry. As DeFi moves from experimental phase to more mainstream adoption, these regulatory questions become increasingly urgent. The conversation at DC Fintech Week represents just one step in what will likely be a long process of finding workable solutions that balance innovation with necessary protections.
What’s encouraging is that these discussions are happening at all. The fact that regulators, developers, and policy experts are engaging with these questions suggests a growing recognition that DeFi isn’t going away—and that finding sensible regulatory approaches is in everyone’s interest.
