How Does Decentralization Affect the Regulatory Oversight of Public Blockchains?

Decentralization complicates regulatory oversight because there is no single central entity to hold accountable for compliance. Regulators struggle to apply traditional financial laws designed for centralized institutions to a distributed network.

This lack of a clear jurisdiction makes enforcing anti-money laundering (AML) and know-your-customer (KYC) rules challenging. Consequently, many jurisdictions are developing new, specific regulatory frameworks for decentralized finance (DeFi).