The ORG-DeFi Model: A Structured Operational Risk Governance Framework for Decentralized Finance Platforms Interfacing with the United States Financial System

Abstract

Decentralized finance (DeFi) protocols increasingly interface with the United States financial ecosystem while exhibiting structural vulnerabilities related to operational resilience, governance fragmentation, and illicit finance exposure. This paper proposes a structured Operational Risk Governance Framework tailored to decentralized financial platforms, translating established financial-sector internal control and operational risk principles into functionally equivalent governance mechanisms suitable for blockchain-based environments. The framework introduces (i) an operational risk taxonomy adapted to DeFi, (ii) an internal control governance model mapped to COSO and Basel-aligned concepts, and (iii) the ORG-DeFi Model, a scoring methodology that evaluates platforms across governance integrity, technical controls, AML and illicit finance exposure, liquidity and market stability, and transparency and monitoring. A hypothetical lending-protocol case example illustrates application for institutional due diligence, compliance assessment, and research benchmarking. By operationalizing governance indicators that align with U.S. policy priorities on financial stability, market integrity, and illicit finance mitigation, this work provides an implementation-oriented methodology to support responsible innovation and strengthen risk governance in decentralized systems.