Legal Challenges of Decentralized Financing (DeFi)

Decentralized finance (DeFi), founded on blockchain technologies and smart contracts, is rapidly becoming a powerful alternative to traditional financial systems. Compared to centralized finance, DeFi offers undeniable advantages such as increased security, speed, financial transparency, and reduced costs. However, this emerging phenomenon faces numerous legal challenges that require careful and effective legal actions. The essence of this phenomenon is the lack of dependence on the national legal regime of countries and lacking centralized monetary and banking supervision over it by national regulatory institutions. This research employs a qualitative method, utilizing library tools and a descriptive-analytical approach, to compare decentralized finance with conventional centralized financing. It examines some challenges as well as the possibility of proper and transparent organization of DFA in Iranian law and, ultimately proposing solutions for regulating the relationships of stakeholders. Considering the lack of sufficient provisions in Iranian law, it is suggested that the jurisprudence of existing legal institutions, such as recognizing an independent legal personality for smart contracts and also civil partnerships, arbitration agreements, arbitration clauses, and Article 10 of the Civil Code, be acknowledged for regulating the relationships of transacting parties until appropriate and comprehensive legislation is enacted. Finally, this research emphasizes the importance of international cooperation, academic environments, and the exchange of experiences in this field. It recommends that legislators move towards recognizing and enacting new laws and regulations aligned with DeFi’s needs, rather than remaining silent, to prevent future legal challenges and potential loss of assets.