DeFi: ANALYSIS OF THE RELATIONSHIP BETWEEN THE TRADITIONAL FINANCIAL SYSTEM AND CRIMINAL ACTIVITIES

Abstract

This article, within the context of modern financial technology development, analyzes the impact of decentralized finance (hereafter - DeFi) on the traditional financial system and its criminal-risk aspects. The study aims to describe DeFi operating mechanisms (decentralized architecture and smart contracts), systematize the directions of change in banking, lending, insurance, and investment services, and identify the main types of misconduct and fraud while proposing preventive measures. The paper clarifies DeFi’s operational features, the role of smart contracts, and the nature of decentralization, and examines DeFi’s position across traditional financial service segments. Types of offenses and fraudulent schemes occurring on DeFi platforms are identified, and prevention measures are proposed. A comparison between DeFi and traditional finance is provided, highlighting key advantages and disadvantages and offering recommendations to reduce criminal risks.