Opinion: Artem Tolkachev, Web3 Investor
When decentralized financing (Defi) first appeared, the basic idea was simple: financial freedom, transparency and the absence of central control. Smart contracts were supposed to replace banks, and liquidity was supposed to be distributed worldwide, and users were supposed to have full control over their money.
It looked like a dream. People embraced this dream, adopting Defi despite technical issues, and UX low means. In the past two years, Defi has developed significantly, treating most of its important problems.
However, the basic concepts of decentralization and freedom began to crack. Compliance, which seemed to be completely unnatural for this ecosystem, is now merged into Defi.
Previously, the main risks in Defi were related to the breakthroughs of smart contracts and low liquidity. Today, the greatest threat comes from excessive compliance. Now we see cases where users lose their money without warning, without asylum, and without transparent standards.
There is no clear organizational body to protect users. Defi projects offer compliance mechanisms, but users are completely isolated against potential abuse. This is especially ridiculous, as Defi has been created as a regulation -free space, however users are now undergoing anti -money laundering mechanisms (AML) without legal asylum.
How does compliance work in Crypto?
In traditional financing, compliance mechanisms aim to prevent money laundering, tax evasion and terrorist financing. In encryption, compliance is applied by monitoring transactions and placing marks on the wallet.
Private analysis companies play a central role, build models to assess complex risks and set wallet risk levels based on the criteria they consider related. These and unorganized services work, but the organizers are pushing the exchange activity and licensed services to adopt their tools over the past decade.
recently: Defi has been set to separate Defi longer and stronger
One of the main problems that any user can face is “wallet pollution” through transactions. If a single portfolio is marked as suspicious, all the wallets that you interacted with it may be punished. In many cases, this happens retroactively. The opposite end, which was initially safe, may be considered a high risk. As a result, users cannot predict or control whether their opposite parties are risky at the time of the reaction. The innocent headlines are blocked, almost impossible access.
This not only affects Defi, but also the licensed virtual asset service providers (VASPS), who may find themselves in trouble as a result of reassessing their customer risk levels retroactively. Banks and payment providers may close accounts based on similar operators, even if the address is clean during the original treatment. This raises questions about the reliability of such assessments and the need for transparent conflict resolution mechanisms.
There is a basic defect in wallet monitoring systems that it does not analyze the actual nature of transactions. If the “red flag” is set for any portfolio in the chain of transactions, this may be sufficient to ban the user. This approach has nothing to do with AML compliance or sanctions in its traditional sense. Even strict banking compliance involves an investigation in cases of suspicious activity instead of automatic ban without the customer dialogue.
Defi not only lacks clear rules and protection against excessive compliance, but also imposes these rules more cruel than traditional banking services.
To reduce risks, users can proactively examine their portfolios for possible penalties. Many tools enable you to get a risk degree for your wallet and the corresponding effects. Of course, this is not a guaranteed solution and does not prevent the post -action portfolio nams, but at least provides some vision before engaging with Defi platforms.
Why do DEFI compliance projects adopt?
At first glance, the reason is clear: the organizers are tightening their grip, and the projects want to avoid enforcement procedures from the Securities and Stock Exchange Committee, the financial procedures team, or the foreign asset control office. This is particularly applied to the platforms registered in the United States, the European Union and other very organized judicial states.
Several lawsuits and administrative procedures have been purposeful for fear and uncertainty in the industry. Monitoring compliance and penalties has become the utmost priority after the Binance issue and enforcement against other exchanges. Lawyers and employees of compliance, for fear of possible penalties and legal risks, prefer excessive coordination, even when the restrictions appear excessive.
In the face of a series of prominent cases, many founders find it difficult to resist these demands, which ultimately leads to the corrosion of the basic Defi principle of getting rid of mediators between users and their money.
Organizational uncertainty is only part of the image. Several projects seek to finance prominent investment capital companies, and ask the teams to comply with the AML/KYC standards. In addition, since more developers work as legal entrepreneurials that can be identified instead of unknown shareholders, they proactively implement compliance mechanisms to reduce risks to themselves and their investors.
Another reason is false. Some projects use the term “Defi” but in fact central entities. They are seeking to avoid licensing books with reducing AML risks and penalties by carrying out wallet blocks and verification operations. As a result, Defi turns into CEFI, but without central system guarantees.
Can Defi coexist with the organization?
Compliance will not disappear, but it can be more transparent. One of the potential methods is to adhere to the compatibility, as users decide whether your customer (KYC) will be recognized to interact with specific protocols. This may lead to the creation of fragmented environmental systems within Defi, where some platforms correspond to regulatory requirements while others remain as independent as possible.
From a technical perspective, transparent ban mechanisms can be implemented. Instead of simply “cut” the governor based on decisions from the mysterious analysis companies, projects can use the Onchain mechanisms governed by decentralized independent organizations. This would allow users to know why the portfolio banned and participated in resolving disputes rather than exposure to sudden penalties that they cannot compete with.
Another option is to develop “clean” liquidity pools, where the assets are examined in exchange for clear and pre -determined criteria instead of hidden interconnected analysis algorithms. This can reduce the risk of arbitrary blocks while maintaining a certain level of organizational compliance.
All of these mechanisms require a balanced approach. If the Defi protocols continue to provide central compliance mechanisms, they risk following the fate of central exchanges, as controlling in a few hands. The implementation of transparent decision -making forms and ensuring the user’s control of the protocol governance can help maintain a balance between organizational compliance and user freedom.
There is also an alternative perspective: if Defi remains a truly disgraced – without front ends controlled by the central teams and without one entry point that can be pressed – the organization and compliance may not be necessary. The question is whether this is realistic in today’s environment. Most users still prefer a comfortable user interface instead of interacting with smart contracts directly.
Divi’s future
If Defi continues in the path of hidden compliance, it will lose its main advantage – decentralization. Within a few years, we may not see a free financial market but a new form of central platforms with UX worse and increased risk of wallet blocks.
There is still an opportunity to change this path. Developing new organizational models, transparent onchain mechanisms, and a clear separation between Defi and the industrial CEFI in maintaining their independence.
Compliance should not become a mechanism for hidden control. It can serve as a tool to protect users and projects – if it is consciously implemented instead of closed decisions and a collective portfolio.
Currently, users must regularly verify their wallets for possible penalties, and as possible, to spread money through multiple addresses to reduce risk if there is a sudden mass.
Opinion: Artem Tolkachev, Web3 Investor.
This article is intended for general information purposes and does not aim to be and should not be considered legal or investment advice. The opinions, ideas and opinions expressed here are alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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