DeFi Regulation

Definition ∞ DeFi Regulation pertains to the rules and legal frameworks established by governmental bodies to oversee and govern decentralized finance protocols and activities. These regulations aim to mitigate risks associated with illicit financial activities, protect investors, and ensure the stability of the financial system. They represent an attempt to apply traditional financial oversight to novel digital infrastructures.
Context ∞ The regulatory stance towards DeFi remains a dynamic and contentious area, with governments worldwide grappling with how to classify and supervise decentralized financial instruments and platforms. Discussions often center on the challenges of enforcing regulations within pseudonymous, borderless systems and the potential impact on innovation. Future developments are anticipated to involve a more coordinated international approach and the creation of specific regulatory sandboxes.