The question of decentralized financial (DeFi), and whether they should challenge regulators has been settled in many ways.

In this corner of the crypto-economy, smart contracts and blockchain technology are used to eliminate intermediaries in lending, trading and saving, as well as other financial activities. The term “intermediaries” is used here to refer not only to banks and other financial institutions, but also to regulators and gatekeepers.

DeFi must comply with the regulatory requirements of various governments to grow, attract investment and be a trusted business model, said most participants at Consensus2023’s closed-door roundtable discussion.

This article is an excerpt from CoinDesk’s first Consensus @ Consensus Report. It was the result of a series of in-depth, curated discussions held at Consensus. Download the complete report by clicking here.

DeFi is now a $47.8-billion industry. It’s spread across a variety of blockchains that are application-friendly, including Ethereum, Solana and Cardano. The core users of DeFi are “crypto-natives”, though some financial institutions have started to pilot closed-circuit versions or run experiments on-chain.

DeFi is one of the few crypto use cases that have found a product-market match. In a year where several crypto lending companies filed for bankruptcy protection, many of whom once had multibillion-dollar valuations with tens or hundreds of thousands of customers, no major DeFi applications failed in the months when crypto’s market capitalization dropped from over $2 trillion down to less than $1 trillion.

These systems are able to liquidate loans that have fallen below the required collateral and return money to their users.


Many stakeholders in DeFi believe that the best way to move forward is to educate and work with regulators to accept DeFi the way it is.

It is important to explain why these design decisions were taken and the benefits that they could bring for both users and financial watchmen. DeFi activities will always be unregulated, unsurveilled, and possibly illicit, because anyone can upload code to a Blockchain and anyone with enough technological knowledge can read that code. All regulatory discussions must be held within this context.