DeFi’s Legal Dilemma: Crypto Without Borders, Crime Without Limits

DeFi lives on blockchains— immutable digital ledgers—and runs on “smart contracts,” self executing code that handles everything from loans to yield farming. No banks. No regulators. Just code and wallets. Sounds liberating, right? But strip away the glamour, and you find a playground for hackers, scammers, and money launderers. In 2024 alone, security breaches siphoned nearly $1.5 billion from unsuspecting users, and once crypto vanishes into the void, it’s gone—no FDIC (Federal Deposit Insurance Corporation) to bail you out. Here’s where it gets darker: DeFi’s very strengths—privacy, speed, and autonomy—are also its Achilles’ heel. Liquidity pools let you swap tokens peer-to-peer in seconds, but they also hand criminals direct control over their loot. Cross-chain bridges cloak transactions by hopping assets between blockchains, mixers shred on-chain trails, and layering through multiple liquidity pools buries the origin of illicit funds under mountains of legitimate-looking trades.

In the attached article you will find thought-provoking pieces on how that which forms the very essence of Decentralised Finance (DeFi), also became the chinks in its armour against financial crime (or perhaps there never was any armour?)

Newsletter - DeFi Crypto Cleanup.pdf

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