What Are “Kill Switches” in DeFi Protocols and Why Might Regulators Favor Them?

"Kill switches" are centralized functions or code mechanisms embedded in a decentralized finance (DeFi) protocol that allow a privileged entity (e.g. core developers or a multisig wallet) to pause, freeze, or shut down parts of the protocol. Regulators might favor them because they provide a necessary point of intervention for investor protection, mitigating risks like smart contract exploits, market manipulation, or non-compliance.

While antithetical to true decentralization, a kill switch offers a mechanism for traditional regulatory oversight to enforce compliance and prevent systemic harm.