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2 Lawyers on How the U.S. Can Finally Regulate DeFi - Ep. 604

Unchained

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Understanding Risks in DeFi

Risks in DeFi differ from traditional finance due to the unique factors in the DeFi world. The primary risks include cyber risk, system management risk, and usage risk. Cyber risk involves code vulnerabilities or loopholes that can be exploited by bad actors. System management risk pertains to situations where decentralized systems are not truly decentralized, leaving vulnerabilities for illicit activities. Usage risk involves using DeFi protocols for activities like transaction layering to obscure money trails, making it harder to trace illicit funds. These risks highlight the need for a different approach to managing and mitigating risks in the DeFi space compared to traditional financial institutions.

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