DeFI brings new challenges for KYC regulations. Post-BitMex, we'll likely enter a new chapter of blockchain regulatory approaches

With DeFi, regulators can bring actions against software companies that developed DeFi protocols, but the smart contracts will still be available

Imputing criminal liability could be harder because the developers of the smart contracts may not have sufficient knowledge to justify these types of charges.

If the developers run the actual smart contract interfaces (something that was raised in the EtherDelta enforcement action), they can either: (1) host the interface on IPFS or another decentralized file storage solution; or (2) geoblock (including potentially the US)

If regulators try to impose liability on deploying a smart contract, projects will avoid deploying the contract and have someone in the community perform that service for a project.

If regulators impose liability on liquidity providers, if applicable, we'll see the creation of shielded liquidity pools.

That's why I think it's important for regulators to encourage responsible governance of these protocols via governance tokens. A well-governed ecosystem has the ability to accommodate sensible concerns of regulators.

I doubt many developers want to help terrorists or help perpetuate fraud. We need to give these projects the ability to act responsibly and governance tokens and governance more broadly seems like the first step in that direction.