Abstract:
The emergent phenomenon of decentralised finance (“DeFi”) can be understood as the performance of financial functions through applications that are built on distributed ledger technology and operate using cryptoassets and smart contracts, without the need for traditional centralised intermediaries. In what ways does DeFi challenge existing financial regulation, and how should regulation develop in light of the DeFi phenomenon? In addressing this question, this article provides an overview of DeFi, surveys the current regulatory landscape in Singapore, considers key regulatory issues and policy considerations associated with DeFi, and discusses some potential directions for the future development of the regulation of DeFi. It assesses (a) the justification for DeFi regulation; (b) the scope for applicability of traditional intermediary-based regulation of points of centralisation in the DeFi context; (c) the scope for introduction of new forms of DeFi regulation (such as “embedded regulation” and “compliance by design”); and (d) DeFi’s implications for traditional financial regulation – focusing particularly on DeFi in the context of Singapore.