Legal Risks and Accountability in Defi Ecosystems

Abstract

Decentralized finance (DeFi) represents a novel financial ecosystem built on open blockchain networks and smart contracts, enabling the provision of financial services without traditional intermediaries. This article examines the conceptual foundations of DeFi, its legal nature, associated risks, and regulatory challenges through a comparative analysis of international practice and the emerging legal framework of Uzbekistan. Particular attention is paid to the composability of DeFi protocols, the legal uncertainty surrounding smart contracts, and the difficulty of identifying responsible parties in decentralized systems. The study analyzes scholarly perspectives, including those of Schär and Zetzsche, and reviews regulatory responses in the United States and the European Union, with a focus on enforcement actions and AML/CFT concerns. It further evaluates risks such as cyberattacks, fraud, money laundering, and consumer harm, highlighting the systemic vulnerabilities of DeFi infrastructures. The article argues that while DeFi offers transparency and innovation, effective regulation requires balancing technological neutrality with robust consumer protection and compliance mechanisms. The findings suggest that Uzbekistan may adopt a cautious, technology-integrated regulatory approach to harness DeFi’s potential while mitigating legal and financial risks.