DeFi needs a chain of responsibility
3 min read
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The worst month in the history of decentralised finance was not a black swan. It was the predictable consequence of a system that has rebuilt financial infrastructure without rebuilding the chain of responsibility that makes finance usable at scale.
Finance is not merely code and capital. It is accountability, enforceability and recourse.
April’s events made that distinction difficult to ignore. A sequence of major exploits, widely reported and, in several cases, attributed by investigators to the Lazarus Group, resulted in hundreds of millions of dollars in losses across protocols and cross-chain infrastructure. The mechanisms varied. The outcome did not. Known vulnerabilities were exploited, capital was lost, and governance responded after the fact.
This is not a tail risk. It is an embedded risk.
The recurrence of such failures is not primarily a function of attacker sophistication. It reflects a structural condition: repeated exposure to known weaknesses, in cross-chain verification, in oracle design, and in governance frameworks that signal intent but rarely enforce it. Early systems fail. Mature systems learn. The concern is not that failures occur, but that identical failure modes continue to produce losses at scale.
Risk is decentralised. Responsibility is not.
A financial system without recourse is not a financial system. It is a mechanism for distributing loss.
In significant parts of the ecosystem, accountability dissolves precisely where it should concentrate. Losses are borne by users and token holders, while the design choices that enable them rarely translate into economic or legal liability for those who make them. Risk is decentralised. Responsibility is not.
Decentralisation, in practice, proves conditional. It is asserted as a principle in normal conditions, but suspended in periods of stress. When crises emerge, emergency powers are exercised, assets are frozen, and decisions are taken by small groups with effective control. Governance becomes credible precisely when it ceases to be decentralised.
What remains is not decentralisation, but discretion without accountability.
The contradiction extends further. The most effective interventions in recent incidents have often come from centralised actors, whether through asset freezes or coordinated responses. A system designed to remove intermediaries continues to depend on them when it matters most.
None of this invalidates the underlying technological promise. Programmable, on-chain financial infrastructure remains a meaningful innovation. But infrastructure alone is insufficient. Without clearly defined responsibility, it cannot support capital at institutional scale.
Bringing clarity and accountability to ensure durability
This is where the next phase is already taking shape.
What financial institutions are building is not a rejection of decentralised finance, but it is convergence with the structures that make finance durable. Tokenised infrastructure retains the advantages of on-chain systems — transparency, programmability, efficiency — while reintroducing what has been absent: legal clarity, enforceable governance, and defined accountability.
Capital does not operate in the absence of constraint. Where risk cannot be measured, it cannot be priced. Where it cannot be priced, it will not be funded. Where it is not funded, it will not scale.
The implication is straightforward. Systems that cannot meet these standards will not be adopted at scale.
The question is no longer whether decentralised infrastructure can be built. It is whether it can be built with the discipline required to manage other people’s money.
Recent evidence suggests that standard has not yet been met. This would certainly put a smile of despair on Ralph Quartano, visionary CEO of the US Post Office pension fund who defined in 1983 the concept of “stewardship” of client assets. A principle dear to CoinShares’ founding team in their original mission to sprinkle a bit of financial freedom into every single European retirement account.
