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Importance of anti-money laundering regulations among prosumers for a cybersecure decentralized finance

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  • Kirimhan, Destan

Abstract

This study displays the importance of anti-money laundering (AML) regulations among prosumers in decentralized finance (DeFi) in establishing cybersecurity. With a game theory model based on an integrated framework of crime theories, we find that beneficial claims of financial inclusivity and pseudonymity of permissionless DeFi come with a cost of vulnerability to cyberattacks due to its incompliance with AML regulations among prosumers. In contrast, cyberattackers can be deterred from attacking AML-compliant permissioned DeFi. These results have important implications for trust as a construct within the context of blockchain-based sharing economy and institutional roles played by decentralized governance and smart contract auditors in creating a “trustless” state-space without forfeiting cybersecurity of a blockchain-based sharing economy. We also provide cybersecurity policy suggestions for permissionless DeFi without sacrificing its decentralized nature.

Suggested Citation

  • Kirimhan, Destan, 2023. "Importance of anti-money laundering regulations among prosumers for a cybersecure decentralized finance," Journal of Business Research, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:jbrese:v:157:y:2023:i:c:s0148296322010232
    DOI: 10.1016/j.jbusres.2022.113558
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