between risks and opportunities according to 1inch

Today at the event MetaForum 2025 in Lugano, 1inch reveals how to make decentralized finance (DeFi) truly secure and institutionally acceptable. 

In the constantly evolving context of decentralized finance (DeFi), regulation represents one of the most complex and controversial topics. 

During a speech at the MetaForum, one of the main European events dedicated to blockchain, crypto, and Web3, a German lawyer expert in financial law offered a concrete and in-depth overview. 

In particular, focusing on how to address the risks of DeFi and build a safe and sustainable ecosystem, even for institutional investors.

The 1inch case: the choice of jurisdiction is crucial in DeFi 

According to the speaker, the main “showstopper” of the crypto world is not so much regulation, but rather the lack of understanding. Authorities often legislate on technologies they do not fully understand.

And how can something be effectively regulated if it is not understood? From here arises the idea of a consapevole self-regulation as a bridge between innovation and institutions.

In 2020, the founders of 1inch – Sergey and Anton – were seeking a license in Germany. The lawyer dissuaded them: “The regulator will never understand your model.” 

The advice was to stay in Switzerland under a SRO (Self-Regulatory Organization) or consider Dubai, jurisdictions more open to experimentation.

This strategic move has allowed 1inch to operate in full legality but without sacrificing the essence of DeFi: decentralization, transparency, and operational freedom.

The European MiCA regulation (Markets in Crypto-Assets) represents a significant milestone for those offering centralized services, but it does not apply to pure DeFi.

Protocols like 1inch, governed by a DAO, do not fall within the scope of the regulation as they do not offer custodial or brokerage services in the strict sense.

An exclusion that represents both an advantage (greater freedom) and a challenge (lack of formal legal recognition).

The philosophy of 1inch is based on self-custody and decentralization. The platform aggregates the best exchange rates among DEX using its Pathfinder protocol, without holding users’ assets or acting as a direct intermediary. Everything happens through smart contracts.

Not being a custodial, a broker, or a regulated service provider, 1inch does not fall among the entities obligated by MiCA. However, this does not mean a lack of control or irresponsibility.

The real risks of DeFi: between hacks and dangerous bridges

The speech highlighted with clarity the main risks:

• Exploitation of unaudited smart contracts
• Bridge cross-chain vulnerabilities (like those used by LI.FI, already a victim of hacks)
• Attacks by groups like Lazarus
• Market manipulation through bots
• Thefts from wallet compromised

To address these risks, 1inch has implemented a multi-layered security model, which includes transaction simulation, geofencing and VPN detection, device fingerprinting, automatic wallet screening, bot detection, and operation surveillance.

Additionally, the project promotes collaboration among industry players. 

If a wallet linked to illicit behaviors is identified, the information is shared with exchange partners to block laundering. An approach that led to the creation of the 1inch Shield initiative, aimed at building trust even with banking institutions.

Security without KYC? Yes, it is possible

One of the most innovative aspects is the ability to ensure compliance without the need for traditional KYC. 

According to the speaker, there are technical tools and procedures that, while respecting user privacy, offer banks and compliance officers a level of trust comparable to that of CeFi processes.

Through a SaaS service, market makers can use all these tools without developing them internally, with a simple monthly subscription. A scalable, effective, and privacy-friendly approach.

The final message of the speech at the MetaForum is clear: transparency, security, and collaboration are the keys to taking DeFi to the next level. 

Even though protocols like 1inch are not subject to traditional regulation, this does not mean operating in the wild west: on the contrary, the adoption of advanced security practices and openness towards partners and authorities is what makes the sector mature.

In an era in which the rules cannot keep up with innovation, DeFi can self-regulate and thrive, also involving banks, institutions, and professional investors. The revolution is not only technical: it is also cultural.