Policy-as-Code: Unlocking DeFi’s $60 billion Future Through Programmable Regulation

- Embedding compliance in DeFi to reduce risk, boost investor trust, and sustain innovation. - "Policy-as-code" offering a framework to align decentralized technologies with evolving regulations. On July 15, 2025, Cointelegraph reported that programmable regulation is a key solution to DeFi's legal uncertainties. In a thought-provoking piece, Raks Sondhi, COO of Freedx, championed the idea of "policy-as-code," a system that embeds compliance protocols directly into blockchain code. Sondhi argued this approach could transform DeFi by minimizing risk, attracting investors, and fostering secure innovation while navigating complex regulatory demands. Traditional regulatory systems often clash with DeFi’s decentralized and fast-paced nature. In contrast, "policy-as-code" allows developers to integrate jurisdiction-specific compliance templates directly into protocol infrastructure, giving them the flexibility to adapt in real time while reducing their reliance on costly legal services. As a result, by embedding compliance, developers can de-risk the sector, bolster consumer protection, and spur technological progress, which fosters greater investor confidence. This proposal’s timing is significant, as global regulators are intensifying their focus on DeFi. For instance, the European Union’s Markets in Crypto-Assets (MiCA) framework coordinates efforts to regulate crypto markets, while in the U.S., agencies like the SEC and CFTC are increasing enforcement actions. Meanwhile, crypto-friendly jurisdictions like Wyoming are pioneering DAO legislation to formalize decentralized governance. These developments underscore the urgent need for DeFi to align with regulatory expectations. Despite its promise, programmable compliance faces challenges, with key concerns including security vulnerabilities in code, exploitation risks, and governance complexities. Sondhi warned that neglecting these risks could erode trust in decentralized ecosystems and slow mainstream adoption. In addition, ensuring transparency and public accountability is vital, as these principles must remain central to "policy-as-code" frameworks to safeguard consumer interests and uphold democratic oversight of financial systems. To achieve sustainable growth, therefore, DeFi must prioritize robust, adaptable, and secure infrastructures. Sondhi’s article presents "policy-as-code" as a compelling roadmap for DeFi's future, offering an innovative bridge to regulatory certainty and expanded adoption. Without this evolution, the sector could face prolonged uncertainty, driving away capital and stifling innovation—a risk the growing $60 billion DeFi market can hardly afford. As of July 15, 18:08 UTC, Tether USDt (USDT) was trading at $1, with minimal fluctuation in the past 24 hours. Trading volume over the same period stood at $136.88 billion, reflecting the continued prominence of stablecoins in the DeFi landscape.