Alexander Sudeykin is a co-founder and Chief Growth Officer at Evaa Protocol, a leading lending protocol. getty Decentralized finance has been thriving without strict regulations, making the sector innovative and flexible but also risky. In 2025, governments worldwide are tightening the rules, yet this shift doesn’t spell doom for DeFi.
The real question is: How will the industry adapt? Will DeFi projects relocate to more welcoming jurisdictions, evolve to comply without sacrificing decentralization or find new ways to navigate increasing regulatory pressure? The following are my predictions for the DeFi landscape in the coming year and beyond.
DeFi Regulation: The Pressure Is Mounting, But So Are The Solutions Pressure on the decentralized finance ecosystem is intensifying as major economies roll out new requirements for DeFi. In the U.S., DeFi providers had a turbulent year in 2024, with the Securities and Exchange Commission cracking down on numerous decentralized finance protocols. Many projects faced enforcement actions, resulting in heavy fines and even forced shutdowns.
Although the Trump administration replaced Gary Gensler at the SEC and promised a friendlier approach, the IRS has thrown new challenges at DeFi instead. Introduced at the end of December 2024, the federal agency’s new rules would require decentralized finance platforms to be treated like traditional brokerages from 2027, forcing DEXs and similar services to report transactions just like any big-name broker. However, a March 11 U.S. House vote has introduced a new twist to the situation, with lawmakers passing a resolution to overturn the IRS’s DeFi broker rule.
The decision to roll back the federal agency’s December regulations for decentralized finance platforms means that the DeFi sector in the United States could avoid strict scrutiny and continue expanding without being subject to stringent reporting requirements. Now, only a Senate vote is necessary—previously passed earlier but requiring another approval—before the resolution is sent to U.S. President Donald Trump for signature. While decentralized finance regulations are taking a positive turn in the U.S., the EU is ramping up scrutiny.
On December 30, 2024, the EU’s Markets in Crypto-Assets (MiCA) framework went live, introducing licensing mandates for crypto service providers across the region. There’s a carve-out for “fully decentralized” solutions, but most DeFi projects still rely on a few centralized elements, which could drag them under MiCA’s umbrella. And it doesn’t stop there.
European regulators keep probing DeFi’s risks, with the EBA and ESMA spotlighting potential pitfalls in their joint report, and the EU’s Policy Department for Economic, Scientific and Quality of Life Policies already eyeing more rules beyond MiCA. In other words, we may be looking at an even tighter regulatory net for DeFi down the road. In other words, regulatory frameworks around DeFi are only tightening in Europe.
On the other hand, the situation is expected to change drastically in favor of decentralized solutions in the U.S. What’s Next For DeFi: The End Or A New Era? With regulators in the EU taking aim at decentralized finance, many are asking if these developments might bring about DeFi’s downfall—or trigger a transformation. I see three scenarios in play for projects confronted with strict or murky rules.
In the first scenario, DeFi protocols decide regulations in these regions are simply too daunting, too confusing or both, so they pack up and relocate to friendlier territories. This is similar to what big crypto exchanges did after the People’s Bank of China issued a blanket ban on digital asset transactions or when SEC actions in the U.S. pushed various exchanges overseas to jurisdictions like the UAE, Singapore and Switzerland. DeFi providers could find a safer harbor in those same countries.
But relocation is not always necessary. If new DeFi regulations allow providers to comply without surrendering the core values of decentralization, most protocols will stay put. In this case, policymakers may target fraud and ensure consumer protection without exerting total oversight.
For example, they might offer exemptions for most DeFi protocols, making KYC optional rather than mandatory. That way, everyday operations continue without major service interruptions. This development is now becoming particularly relevant for the U.S.
If the Senate passes and Trump signs the recent repeal of the IRS’s DeFi broker rules, decentralized finance protocols will be able to continue operating without strict restrictions in the country. The final scenario is what seems likely in the EU after MiCA’s rules take effect. Protocols can either embrace partial centralization—in other words, rebrand as “CeDeFi” solutions that blend centralized compliance with decentralized features—or they can double down on full decentralization, which may exempt them from some rules.
Institutions may prefer CeDeFi structures for clarity and risk mitigation, but truly decentralized ecosystems could dodge certain obligations entirely. DeFi Will Stay, But Its Geography Might Shift 2025 marks a turning point for DeFi regulation, yet it’s not the end of decentralized finance—it’s a test of adaptability. Some projects may relocate to jurisdictions with more crypto-friendly policies, while others will evolve to comply without sacrificing decentralization.
The U.S. could see a resurgence of DeFi activity if a more favorable regulatory environment materializes under Trump’s leadership, while the EU is moving toward a structured but restrictive approach. Whether through full decentralization, hybrid CeDeFi models, or strategic relocations, DeFi will persist in one form or another. The real question is not if DeFi will survive, but rather how it will transform—and whether regulators and industry players can strike a balance that fosters both innovation and compliance.
