During D.C. Fintech Week in Washington, D.C., experts discussed how decentralized finance projects can align with regulatory requirements. The panel, moderated by a CoinDesk journalist, featured leaders from the BIS Innovation Hub, Aleo, and Ava Labs. Participants agreed that developers can incorporate compliance tools, though challenges remain in defining standards.
The conversation took place on Thursday at D.C. Fintech Week, focusing on the tension between decentralized finance (DeFi) and regulatory compliance. Moderator Nikhilesh De, from CoinDesk, posed key questions: Are developers liable for misuse of their projects? Can they prevent criminals from exploiting them? He referenced ongoing cases against Tornado Cash developers Roman Storm and Alexey Pertsev as examples of this debate.
Panelists included Maha El Dimachki, head of the BIS Innovation Hub's Singapore Centre and formerly with the UK's Financial Conduct Authority; Yaya Fanusie, global head of Policy at Aleo; and Lee Schneider, general counsel at Ava Labs. They explored whether compliant DeFi is an oxymoron, given that truly decentralized protocols allow unrestricted use without developer interference.
The group concurred that developers could build in features to meet regulations, but emphasized caveats. Fanusie framed developers' duties as 'risk management,' addressing potential issues like alleged money launderers or malicious actors. Schneider noted alignment between developers and regulators in preventing user losses. El Dimachki advocated for outcome-based policymaking, targeting the prevention of malicious activity.
A consensus emerged that steps exist to avoid regulatory violations, yet details matter. The discussion highlighted broader challenges: Can global, open-source DeFi projects comply across jurisdictions? What liability holds if malicious actors create custom front-ends? De invited reader input on these questions, underscoring the ongoing nature of the debate.