INATBA's Finance Working Group Publishes New Report on DeFi Self-Regulation - INATBA
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26 Feb INATBA’s Finance Working Group Publishes New Report on DeFi Self-Regulation

Posted at 23:36h in Reports by

Decentralized Finance (DeFi) is one of the most groundbreaking financial innovations of the century. However, with regulators yet to establish clear guidelines, the question arises: Can the industry self-regulate to ensure security and growth while maintaining decentralization?

INATBA’s Finance Working Group produced a report, which proposes a structured approach to DeFi self-regulation, offering best practices designed to mitigate risks and foster trust without compromising innovation.

To prevent common pitfalls and establish a sustainable financial ecosystem, the report highlights five key areas where self-regulation can enhance security and compliance:

1. Real-Time Financial Reporting

  • DeFi protocols should implement transparent, automated dashboards to track liquidity, collateral levels, and risk exposure in real time—ensuring financial resilience without external oversight.

 

2. Smart Contract Security Standards

  • Strict audit requirements and on-chain fail-safe mechanisms should be adopted to prevent exploits, front-running, and liquidity attacks.

 

3. Decentralized & Transparent Governance

  • Governance models must prevent excessive insider control by distributing decision-making power fairly, ensuring no single entity can compromise security.

 

4. KYC/AML Compliance at Key Intermediary Layers

  • Rather than imposing KYC on decentralized protocols, self-regulation should focus on centralized intermediaries like fiat on/off-ramps, maintaining financial privacy while preventing illicit activities.

 

5. Open-Source & Permissionless Innovation

  • Protocols adhering to self-regulatory standards should gain preferential access to integrations, promoting trustless and verifiable financial tools as industry norms.

 

Why Self-Regulation Matters

By implementing these principles, DeFi can build confidence among institutional and retail users, prevent fraud and technical vulnerabilities before they occur, ensure sustainable decentralized financial innovation, and help legislators construct a sound, sensible, and affordable regulatory framework. A proactive, industry-driven approach allows DeFi to evolve responsibly while maintaining its core values of decentralization and accessibility.

A special thank you to the authors and contributors of this report: Izzat-Begum B. Rajan (Finance WG Co-Chair, Imani Partners, Mosaik), Jean-Christophe Mathonet (Finance WG Co-Chair, ProSquare), Adrian Pollard (HollaEx), Alireza Siadat (1inch), Benjamin Buergi (Cardano Foundation), Georg Brameshuber (Validvent), Giannis Rousopoulos (IOTA Foundation), Giles Swan (Blockchain.com), Ismael Arribas (Kunfud), Ivan Gurtikov (Caisse des Dépôts), Jan Klesla (Blockchain Republic), Jed Grant (KYC3), Lana Schwartzman (Notabene), Max Bernt (Blockpit), Mykola (Niko) Demchuk (AMLBot), Olena Zabrodska (1inch), Tom Jansson (IOTA Foundation), Zeno Auersperg (Blockchain Italia), Antonio Lanotte (EU Blockchain Observatory and Forum), Donna Redel (INATBA Academic Advisory Board, Fordham Law and Business School), Jim Mason (EU Blockchain Observatory and Forum), María del Sagrario Navarro Lérida (INATBA Academic Advisory Board, Universidad de Castilla la Mancha).

We invite everyone interested in the report to read it via the form below:

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About INATBA

Launched in 2019 by the European Commission, INATBA – International Association for Trusted Blockchain Applications is a highly influential Association in promoting Blockchain and DLT adoption in Europe and globally. INATBA is mainly known for its credibility with regulatory authorities and policymakers and is appraised for its contributions to Markets in Crypto Asset Regulation (MICA), Transfer of Funds Regulation (TFOR), electronic Identification, Authentication and Trust Services (eIDAS), CHAISE Project, EU Pact for Skills, Academic & Governmental Advisory Bodies, and its passionate diverse global community of CEOs, CTOs, Heads of Policy, Public/Institutional Relations, Legal, Marketing & BizDev, Developers, Policymakers. To learn more, visit www.inatba.org.

Press Contact

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