What Are the Challenges in Applying Traditional Finance Regulations to DeFi?

Traditional regulations struggle with DeFi due to its decentralized, pseudonymous, and borderless nature. There is no central entity to regulate, such as a broker or exchange, as smart contracts execute the trades.

The core problem of front-running in DeFi is technical (mempool visibility), not a breach of fiduciary duty, which is the basis for traditional anti-front-running rules. Regulators face challenges with enforcement, jurisdiction, and adapting rules designed for intermediaries to a system without them.