What DeFi is and why the law struggles with it

Read the PDF edition (1 page)

Decentralised finance (DeFi) is the collective name for financial services delivered by smart contracts on public ledgers without an intermediary holding customer assets. Users interact directly with the contracts from their own wallets. The contracts hold assets, match orders, make loans, liquidate collateral and pay rewards according to published code. By mid-2026 the total value locked in DeFi protocols was in the range of USD 100 to 150 billion, concentrated in lending, decentralised exchange, liquid staking and stablecoin issuance.¹

Financial regulation in both hubs assumes that a service is provided by a person. The Anti-Money Laundering Act applies to financial intermediaries. The Payment Services Act licenses persons who provide payment services. The Banking Act licenses persons who accept deposits. DeFi presents a service with no obvious person behind it. Both regulators have spent the years since 2020 deciding whether to find one. This chapter explains each major DeFi mechanism to the point where the legal question emerges, and then sets out the positions of the Federal Council and MAS. The regulatory consequences in each hub are in Part E, Chapter IX and Part K, Chapter IX.

Notes

Total value locked figures from DefiLlama as at June 2026 are approximate; the Federal Council's DeFi report of 16 December 2022 and the FSB's report of 16 February 2023 give institutional descriptions of the sector. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of October 2026.

English

Contact

Dr Alexander Ressos, TEP

Of Counsel, KGP Legal LLC

I am Of Counsel with KGP Legal LLC in Singapore, where I work with a global client base of successful entrepreneurs and their families, independent asset managers, commodity trading houses and other commercial clients. I am a German and Swiss attorney-at-law, also admitted as a solicitor in England & Wales and in Hong Kong. I divide my time between Zug in Switzerland, Singapore and Hong Kong. Since 2017 I have advised international clients on more than 700 crypto and digital asset projects. I also have extensive experience in cross-border litigation and arbitration in Singapore, Hong Kong and other markets in South-East Asia and Greater China.

I operate across the key financial centres in South-East Asia, the Middle East and Switzerland, with a particular focus on asset protection, international tax and estate planning, as well as trusts, company administration and other fiduciary services. My philosophy is to serve as a trusted advisor working closely with my clients and to help them achieve their commercial objectives.

All Singapore law advice is provided through KGP Legal LLC, an established and duly licensed firm of Singapore advocates and solicitors.

KGP Legal LLC is a medium-sized law firm in Singapore that is capable of providing the full range of legal services and corporate administration work. Please contact me if you need any further information.

Get in touch →

Articles and Insights

Setting up or expanding in Singapore?

SingaporeIQ is edited by Dr Alexander Ressos, an international business lawyer with more than 15 years of local experience in Singapore as a permanent resident, a Singapore registered foreign lawyer and managing partner of a Singapore foreign law practice. In addition to significant experience in cross-border investments and transactions, UHNWI private client work and sanctions/export controls, Dr Ressos has extensive experience in cross-border business and in crypto and digital-asset projects in Singapore, drawn from more than 700 projects since 2017.

If you are planning a company incorporation, an investment, a holding structure or a market entry through Singapore, you can reach Dr Ressos directly at [email protected]. Singapore law advice is provided by KGP Legal LLC, a licensed firm of Singapore advocates and solicitors. Dr Ressos and his team facilitate the full range of Singapore legal, compliance and company administration services, including company incorporation, corporate transactions, commercial contracts, crypto and digital assets, financial regulatory work and dispute resolution, including litigation in the Singapore courts. For Hong Kong, our parallel site HongkongIQ.com offers the same practical guidance. For crypto and digital assets, dltreg.com covers legal, tax and fiduciary services. For legal, tax and fiduciary services in Switzerland, see helveticaregister.com.