DeFi’s Replacement in 2025: What it Could Look Like

After FTX left the business, the DeFi space is getting a complete makeover because crypto users want better security and compliance.

After what happened in the crypto space in 2022, many investors are now wondering what the future will bring. Early this year, the Terra ecosystem went on a crash course, sending the space into a downward spiral that cost investors millions in just a few days. One of the largest centralized exchanges, FTX, went bankrupt, taking millions of dollars in customer assets with it.

Because of these bad things that have happened, many crypto investors are now looking for safety and protection in the form of regulation. The crypto space is known for not having any rules, but investors are losing a lot of money. This is why the DeFi space will end as it is now, as more and more people and governments look to regulatory frameworks as a way out.

Why crypto needs rules and regulations

Since cryptocurrencies became popular more than ten years ago, there have been a lot of worries about their safety. Even though the blockchain is a big step forward for technology, it also turned out to be a breeding ground for new exploits and hacks.

Since 2011, when Mount Gox was drained, until the most recent hack of FTX, which led to its bankruptcy, the crypto space has been plagued by bad actors. Billions of dollars have been taken from customers and institutions, but there still needs to be more regulation.

Some people in the crypto community say that regulation will go against the point of blockchain and cryptocurrency, which is to be a decentralized financial system. But it’s clear that they need to follow the rules and be watched in some way. With an agreed-upon standard of behaviour and a set of rules about how operations should be transparent, decentralized finance will be able to become a worldwide financial system.

DeFi under threat

At first, decentralized finance, or DeFi, promised investors a market that could run itself and had almost no intermediaries. With decentralized node operators in charge of control and responsibility, everything was supposed to run smoothly without the need for a central institution to keep an eye on things.

And in some ways, the DeFi industry has been able to do that. Cryptocurrency and decentralized finance made it possible for people to invest in ways that weren’t possible before. Unlike the stock market, anyone can use crypto, and DeFi does an excellent job of showing that.

Unfortunately, everyone does terrible things, and that includes hackers and other bad people. There are still scams, hacks of intelligent contracts, hacks of private wallets, and a lot of illegal activity in the space. This lack of security could mean the end of DeFi as it is now. More and more investors are looking for ways to protect their assets, and the crypto space still needs help with that.

Getting Rid of the Baby With the Bathwater

Even though the crypto community is working hard to change how regulations work, the space and the community have a hard job ahead of them. Security needs to get better, but not at the expense of DeFi’s core ideas.

There is a real chance that regulations could get in the way of what DeFi has been trying to do from the beginning: make a free and open financial system for everyone in the world. The concept of decentralization must continue to underpin the entirety of the cryptocurrency industry and the financial services it provides. Regulation will be of assistance to DeFi so long as it is carried out with care and does not eradicate both the positive and negative aspects of this particular financial system.

Compliance with the right kind

Compliance is one of the essential things that DeFi needs to work on in order to meet the expectations of the community. As things stand now, there need to be more unified standards and compliance guidelines, so DeFi platforms and products often need to remember essential parts of how they work and how safe they are.

Compliance standards should be put in place if DeFi is to stay around and become a solid financial system. There are already many companies out there trying to make blockchain-based services more accurate and straightforward, but only a few people use them.

Of course, it’s essential to find a balance between regulatory measures and compliance requirements and the freedom and decentralization that are at the heart of DeFi. The next generation of products in this space will make sure that DeFi projects and their customers have a safe place to work. And getting everyone in the blockchain ecosystem to agree on a single standard will help reach this goal.

DeFi is a new kind of global financial system that is here to stay. But the space needs to grow and change to meet the needs of the people who use it. The DeFi space has a hard road ahead. Recent events have taught us some important lessons, and the community is pushing hard for change.

Dr. Mircea Mihaescu is the CEO of Coinfirm. He has worked for over 30 years in large technology companies, financial services companies, and startups in roles such as COO, CTO, and VP of Engineering. COO of US challenger bank Moven and co-founder of OwlRidge Capital. The man who started SBT Venture Capital.

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