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As regulatory scrutiny continues to grow, DeFi platforms will ultimately have a decision to make when it comes to implementing additional KYC processes to provide a more secure environment where customers can manage their crypto assets with confidence. Like any financial instrument, users need to do their own research, understand the risks, and build financial literacy to ensure they can get the best returns for their investment.

Naturally, the responsibility to do this cannot wholly be put on the customer, too — DeFi platforms need to play an active role in educating customers, ensuring that they can navigate their platforms safely while bolstering them with sufficient guardrails and security measures.

«Investing in cryptocurrency is not unlike entering the traditional stock market through online trading platforms»

As a whole, the recent high-profile hacks have only added to the regulatory pressures, but we remain optimistic that as more DeFi projects mature, retail and institutional investors will recognize their potential and regulations will evolve to adapt to the growing demands of DeFi. For regulators, it is critical to take an approach that encourages rather than hinders innovation. 

How can investors stay protected?

Investing in cryptocurrency is not unlike entering the traditional stock market through online trading platforms — it is important investors do their due diligence to understand the risks and rewards. It is equally important for platforms to ensure that they provide a safe and secure environment for their customers. In this regard, investors need to be aware of several key points: where the platform is based, transparency and accountability, and its security features.

«Investors need to be aware of several key points»

Singapore is a great example of a global financial hub that is home to leading DeFi projects as well as CeDeFi platforms such as Cake DeFi. There are few countries in the world where financial service providers are as well-regulated and closely watched in the best interest of the customer as they are in Singapore. Next, when it comes to understanding risks, transparency is critical, and investors must know exactly what is going on in their DeFi projects. Finally, it is important for investors to understand the security features of the DeFi platforms they are on and the underlying blockchains on which they are built so they can better assess their risks.

With Cake Defi, the absolute majority of our customers’ funds are stored completely offline and securely in cold storage facilities, so they are virtually impossible to hack. Only a small fraction is stored in a so-called «hotwallet», which is mainly used at exchanges.

Julian Hosp is the CEO and Co-Founder of Cake DeFi, a dedicated platform that enables users to generate cash flow from their crypto. In addition, he is also the Co-Founder of DeFiChain, a native DeFi blockchain built for the bitcoin ecosystem to enable access to fast, intelligent, transparent and secure decentralized financial services. He is widely regarded as a pioneer and leading influencer in the crypto space, with over 100,000 followers globally. His ideas, knowledge and influence have been conveyed in numerous articles, and through keynote engagements at industry-leading blockchain conferences.