Wall Street finally submits to DeFi regulations

Comment by: Mitchell Amador, Immunefi Founder and CEO

There is an argument that regulation divides decentralized finance (DeFi) into two distinct silos: one that is regulated and compliant and the other that is completely open and accessible to anyone, including anonymous participants.

This argument is outdated.

In the year The regulatory push in 2026 will transform DeFi into a network of interoperable, interconnected ecosystems with distinct risk, compliance and access profiles.

Some tiers will be more compliant and institutional-friendly, while others will be open, license-free, and driven by onchain usage and market testing.

This evolution will not drag DeFi into TradFi. Instead, it brings TradFi into the DeFi orbit.

DeFi already works in several ways

DeFi has never been a single monolith; It works on different levels of compliance.

The first line is permissionless DeFi, where anyone can deploy contracts, provide liquidity and leverage. This is the engine of innovation, as is failure, where value discovery and stress testing happen in public. Unauthorized pools do not know your customer (KYC), allow anonymous users and exist because global markets can move faster than regulated institutions.

The next level involves protocols with built-in safeguards such as liquidity rules, governance frameworks and verbal safeguards, but no identity requirements. These are used for people who want liquidity and want a product with risk management.

Finally, there is the new, heavily regulated lane, where KYC checks, geofencing and compliance filters are implemented at the access point level.

Smart contracts under the same root can still be accessed, just through different gateways.

Promotes fluid isolation.

Complete DeFi is impossible to completely isolate. Capital requires liquidity, and liquidity requires integration. This means that regulated lines pass through unlicensed infrastructure.

Institutions entering digital assets want access to the level of liquidity that only onchain markets can provide – 24/7 global access, proximity settlement and traditional locations cannot match. The passage of the GENIUS Act, which bans stablecoins that offer production, has already pushed the search for returns on institutional capital into DeFi protocols.

Institutions are more likely to take on complex and innovative risks if the amount of cash received is sufficiently compelling. Regulation does not eliminate this incentive.

Safety innovation starts with the platform

Institutional and compliant participants care deeply about security, but the center of gravity for security innovation lies in permissionless DeFi.

This may seem counterintuitive given that more than $3.1 billion was lost to hacking and exploitation in the first half of 2025 alone.

Related: For Wall Street's most sophisticated businesses, the next alpha is onchain.

Opposite situations are precisely where strong defenses are created. Bug bounty programs, real-time monitoring tools, and AI-driven threat detection were all born in a license-free environment and are live exploits that are stress-tested before any compliance framework takes over.

This pattern accelerates. From automated vulnerability scanning to onchain firewalling, new security models will continue to emerge in open DeFi and then become institutionally accepted once they become standardized and effective.

The regulation reinforces the central role of Defin.

Regulation certainly won't break DeFi. Instead, we see how decentralized finance strengthens its position in the international financial center.

In the future, for sure, it will not respect DeFi and permissionless DeFi, because DeFi has the ability to be interconnected. It is a network where open markets generate liquidity and innovation and where regulated players can selectively plug. That's why we see regulatory pressures shaping the ecosystem into interconnected tiers, some pushing for greater compliance and others pulling toward an open marketplace, all connected by the combination that makes onchain finance uniquely powerful.

As institutions seek decentralized markets with greater liquidity, speed and efficiency, that dynamic will inevitably bring TradeFi closer to DeFi.

Comment by: Mitchell Amador, Immunefi Founder and CEO.