DeFi Regulatory Landscape 2025: Standard, Consensus, Collaboration

Decentralized Finance (DeFi) is entering a new era in 2025, with regulatory frameworks maturing globally. This year is poised to be transformative, as regulators, industry players, and global jurisdictions converge to create a more structured and collaborative landscape for DeFi and the broader cryptocurrency industry. In this article, we explore key developments that highlight how 2025 could shape the future of DeFi regulation.
Standard and Consensus
A clearer regulatory framework is emerging, focusing on licensing, taxation, AML measures, user protection, data protection and security, overall internal governance and risk management, and even smart contract security standards. Below are examples from the European Union’s Markets in Crypto-Assets (MiCA) regulation, the United Kingdom’s approach, and Dubai’s Virtual Assets Regulatory Authority (VARA):
Licensing:
- MiCA (EU): MiCA requires crypto-asset service providers (CASPs) to obtain authorization from national competent authorities to operate within the EU. Once authorized in one member state, CASPs can “passport” their services across the entire EU, promoting business growth and creating a unified standard for crypto-asset businesses.
- United Kingdom: The UK has implemented a registration regime for crypto-asset businesses under the Financial Conduct Authority (FCA). Firms must register and comply with AML and counter-terrorist financing (CTF) requirements to operate legally.
- VARA (Dubai): Dubai’s VARA mandates that virtual asset service providers obtain a license to operate within its jurisdiction, ensuring compliance with local regulations and standards.
Taxation:
- MiCA (EU): While MiCA itself does not directly address taxation, it complements other EU initiatives like the Directive on Administrative Cooperation (DAC8), which aims to enhance transparency and information exchange on crypto-assets to combat tax evasion.
- United Kingdom: The UK treats crypto-assets as property for tax purposes. Individuals and businesses are subject to capital gains tax or income tax on their crypto-asset transactions, depending on the nature of the activities.
- VARA (Dubai): Dubai currently offers a tax-friendly environment for virtual asset activities, with no specific taxes on crypto-asset transactions.
Anti-Money Laundering (AML) Measures:
- MiCA (EU): MiCA introduces strict AML and Know Your Customer (KYC) requirements, obligating CASPs to implement robust procedures to prevent money laundering and terrorist financing. This includes customer identification, transaction monitoring, and reporting suspicious activities.
- United Kingdom: The UK enforces AML regulations for crypto-asset businesses, requiring them to conduct KYC checks, monitor transactions, and report suspicious activities to the relevant authorities.
- VARA (Dubai): VARA requires virtual asset service providers to adhere to AML and CTF regulations, including implementing KYC procedures and reporting obligations to prevent illicit activities.
User Protection:
- MiCA (EU): MiCA emphasizes consumer protection by enforcing transparency, cybersecurity, and consumer rights. CASPs must provide clear information on their services, fees, and associated risks, ensuring users are well-informed.
- United Kingdom: The UK focuses on protecting consumers by ensuring crypto-asset firms provide clear disclosures about risks and are subject to conduct rules that promote fair treatment of customers.
- VARA (Dubai): VARA implements measures to protect users, including requiring service providers to maintain transparency, ensure the security of client assets, and provide clear information about their services.
Data Protection and Security:
- MiCA (EU): MiCA mandates that CASPs implement adequate security measures to protect users’ personal data and funds. This includes safeguarding against cyber threats and ensuring operational resilience.
- United Kingdom: Crypto-asset businesses in the UK must comply with the General Data Protection Regulation (GDPR) and implement robust cybersecurity measures to protect user data and assets.
- VARA (Dubai): VARA requires virtual asset service providers to establish strong data protection and cybersecurity frameworks to safeguard user information and maintain the integrity of the virtual asset ecosystem.
These regulatory frameworks aim to create a safer and more transparent environment for crypto-asset activities, fostering innovation while protecting users and maintaining financial stability.
While individual jurisdictions may have their unique approaches, these core areas are essential for regulators aiming to position themselves as creditable participants in the global crypto space.
For instance, with the upcoming administration, it is widely anticipated that the US will provide more regulatory clarity on cryptocurrency and related activities in the US, and if this happens as anticipated, it could solidify its position as a global hub for crypto innovation. Such advancements in the U.S. are likely to accelerate regulatory developments worldwide, setting the tone for broader industry growth and adoption.
Collaboration
The crypto industry is witnessing a surge in collaboration on multiple fronts: CEX giants are leading efforts to set unified standards, with similar initiatives expected to extend to DeFi. Simultaneously, the divide between TradFi and DeFi is narrowing, as institutions increasingly explore partnerships to integrate blockchain-based innovation into conventional systems. Adding to this momentum, global regulators and jurisdictions are working together to create cohesive frameworks that address the borderless nature of DeFi, balancing innovation with compliance and user protection.
Greater collaboration within crypto, starting from CEX giants, expanding to DeFi soon
Like never before, all major market leading CEXs are now actively cooperating with global regulators and seeking licenses - Binance now holds 21, and we see Coinbase, Crypto.com all very proactive in obtaining licenses in the EU jurisdictions. It is gonna be problematic if you don’t get ahead, Bybit just got banned in Malaysia, following its major ban from the French government last year.
In terms of DeFi player’s collaborative efforts, the SEC’s attempt to target Uniswap highlights the need for DeFi players to proactively engage with regulators. Ignoring regulatory realities is no longer an option.
Greater collaboration between TradFi and DeFi
DeFi’s development is not on its own, the TradFi world is watching closely and keen to tap in the massive potential market, it’s just for TradFi players, starting from the scratch to build their DeFi protocol is not realistic or cost effective as a business. But the interest is there, and it’s huge. Although not directly transferrable, there are certain TradFi playbook and benchmark that DeFi can borrow. For example, Bank of England’s leader had already made speech on DeFi regulation in 2022, it’s a must that both worlds talk and communicate to push the whole industry forward.
On the other hand, we see TradFi players like Robinhood and eToro actively eating into the crypto trading business already.
Greater collaboration across jurisdictions and global regulators
Given DeFi’s decentralized and global nature, it’s natural to come to a point where jurisdictions and global regulators collaborate to come up with more sensible approaches and frameworks that allow innovation without compromising compliance and user protection. Regulators will need to work together to create sensible and unified frameworks that address DeFi’s borderless operations while respecting regional nuances.
The FATF (Financial Action Task Force) is a leading example of international regulatory collaboration. It has developed guidelines for virtual asset service providers (VASPs), emphasizing:
- AML and combating the financing of terrorism (CFT).
- The “travel rule”, requiring VASPs to share customer information during transactions exceeding a certain threshold.
Many jurisdictions, including the EU, US, and Singapore, align their regulations with FATF recommendations, fostering global consistency.
The European Union and the United States regularly collaborate through initiatives like the Joint EU-US Financial Regulatory Forum. DeFi has been highlighted as an area needing alignment on:
- Risk assessment.
- Regulatory reporting.
- Standards for decentralized exchanges and protocols.
The FSB (Financial Stability Board) has developed a global regulatory framework report to G20 to address risks associated with crypto-assets, emphasizing the need for international cooperation.
IOSCO (International Organization of Securities Commissions) has published a policy consultation aimed at addressing market integrity and investor protection concerns in the DeFi space in September 2023. In December 2023, IOSCO published a final report titled “Policy Recommendations for Decentralized Finance (DeFi).” This report presents nine policy recommendations aimed at addressing market integrity and investor protection concerns within the DeFi space. These recommendations are principles-based and outcomes-focused, designed to support regulatory authorities in establishing compliant DeFi markets.
Last but not least, GFIN’s (Global Financial Innovation Network) 2025 focus includes tokenization projects, led by the Central Bank of Bahrain and the Jersey Financial Services Commission.