A research publication co-authored by Association Expert Council member Fabian Schär
examined one of the central questions surrounding decentralised finance: how regulators can
distinguish genuinely decentralised financial infrastructure from systems that retain
significant elements of centralised control.
The research, authored by Katrin Schuler, Ann Sofie Cloots and Fabian Schär and published
in the Journal of Financial Regulation, develops a framework for assessing the factual
decentralisation of blockchain-based financial infrastructure.
Decentralised finance, commonly known as DeFi, uses blockchain networks and smart
contracts to provide financial functions without relying on conventional financial
intermediaries in the same way as traditional systems.
However, describing a financial application as decentralised does not necessarily mean that
every component of the system operates independently.
The researchers examine different forms of centralisation that can exist across the
technological and organisational layers of DeFi infrastructure. Identifying these points of
control can help regulators determine whether an application has characteristics that may
require regulatory oversight.
The research distinguishes between genuinely independent infrastructure and blockchain-
based financial intermediation that continues to rely on identifiable forms of control.
This distinction has significant implications for policymakers. As blockchain-based financial
systems develop, regulation increasingly needs to consider the underlying structure of a system
rather than relying solely on the terminology used to describe it.
The work demonstrates the importance of combining technological understanding with legal
and regulatory analysis when evaluating emerging financial infrastructure.
Fabian Schär is a member of the Expert Council of the Association of Certified Professionals,
with expertise in Finance, Financial Innovation and Emerging Technology.