Over the last several years, Non-Fungible Tokens (NFTs) and Decentralized Finance (DeFi) have taken the world by storm. They have planted themselves firmly in our collective imagination alongside investors, artists, and technologists. Yet, this emerging space is still very much in the Wild West of Finance era. That’s a big challenge, though, explains veteran blockchain editor Erik Lundström — the lack of clear, consistent regulation. This problem especially affects small and medium-sized businesses (SMBs) that seek to take advantage of the novel ways NFTs and DeFi can drive revenue. Here’s a look at the current regulatory landscape and the challenges it presents. We’ll unpack frameworks that might inform this vibrant, but cumbersome, space going forward.

Indonesia's Upcoming Tax Increase on Cryptocurrency Transactions

Those challenges in steering the pharmaceutical regulatory waters are illustrated by recent events in Indonesia. As digital assets continue to grow in popularity across the world, governments are realizing the need for regulations and taxation over cryptocurrency transactions.

Overview of the New Tax Rate

Indonesia set to increase taxes on crypto transactions. This decision highlights the mounting oversight that regulators globally are exercising over digital assets. The devil in the details The underlying idea is still stark, though — cryptocurrency transactions will be taxed at higher rates. This encompasses all transactions involving NFTs and DeFi protocols, although the precise specifics differ. This increase will have a significant effect on investors and businesses who operate in the Indonesian crypto market.

Implications for Crypto Investors

For crypto investors in Indonesia, the tax hike is a double-edged sword offering both challenges and opportunities. First, it raises the cost of conducting transactions in cryptocurrencies, which may make them less profitable. This indicates the trend of how digital assets are becoming more accepted by the Indonesian government. This acceptance would create a foundation for more regulatory clarity and legitimacy in the future. Those who invest in crypto will have to be more vigilant about thinking through the tax consequences of their transactions and planning around them. This might mean minimizing trading as much as possible, starting tax planning with a qualified professional, and investing in different investment vehicles with a better overall tax efficiency.

Regulation: The Deciding Factor for TradFi Engagement

As noted by Type45 CEO Erik Lundström, regulation is still the biggest unknown factor for TradFi’s (Traditional Finance) rate of engagement with DeFi. Unregulated markets are fraught with risks including fraud, manipulation, and lack of investor protection. Consequently, many traditional financial institutions are wary of leaning all the way into DeFi.

If regulators decide to deem NFTs as such, then the ‘crypto assets’ regulation will only speed up in the next years. Stay tuned for more impact as this determination plays out! By classifying NFTs as crypto assets, regulators are subjecting them to the rules that govern cryptocurrencies. This stretches even to fundamental requirements such as anti-money laundering (AML) and know your customer (KYC) procedures.

Whether or not the ownership of intellectual placement is a major legal ownership. A more recent and high profile example is the attempted sale of Basquiat’s NFT, Free Comb with a Pagoda, on OpenSea last April. The sale had been billed as including all the artists “connected IP and copyrights,” but it was called off after the late artist’s estate informed that those rights were not up for consideration. This case illustrates the confusing web of intellectual property rights that currently exist in NFTs. In order to foster this behavior, we desperately need unambiguous legal frameworks that protect both creators and consumers.

By early 2025, businesses in Europe will have a clear understanding of how to get licensed to provide crypto exchanges and wallet services. At the same time, regulatory guidelines for institutional stablecoins and decentralized finance (DeFi) are being created. Regulatory clarity Regulatory progress in Europe This creates a clear framework for businesses in the crypto space. This important new development is truly where innovation meets opportunity.

The lack of harmonized global rules raises challenges. An institution operating globally must reconcile the stricter rules of one region with the opportunities in another. This lack of uniformity creates confusion and uncertainty for businesses operating across borders, hindering the development of a truly global NFT and DeFi ecosystem.

In the UK, an ongoing consultation has sought to establish the definitions of “works of art” under the proposed new anti-money-laundering regulations. Though it featured the term “digital art,” it hardly suggested that NFTs would fall under this category. That treading lightly is indicative of the uncertainty that still surrounds NFTs and how to categorize and enforce them within existing legal frameworks.

U.S. banking regulators (OCC, Fed, FDIC) issued guidance limiting direct crypto exposure – effectively funneling institutional involvement toward regulated custodians and ETFs rather than direct DeFi usage. These regulatory measures actively seek to protect legacy financial institutions. They shield them from the dangers associated with direct engagement with cryptocurrencies and DeFi protocols.

By approving spot crypto ETFs, the SEC was reacting to increasing political pressure. Combined with court decisions such as the Grayscale decision in 2024, this would further narrow down the scope of the SEC’s jurisdiction with more clear and pragmatic reasoning. These developments suggest a more nuanced approach to crypto regulation in the US, with regulators seeking to balance innovation with investor protection.

By 2025, the FCA is crafting rules for crypto trading and stablecoins, and the Law Commission has recognized crypto assets and smart contracts in legal definitions. The UK’s regulatory precedents are an example the US should follow in prioritizing legal certainty for innovators. Their actions further responsible innovation within the rapidly evolving crypto space.

Overall, as of March 2025 the trajectory is one of cautious but accelerating engagement: traditional finance is no longer standing on the sidelines of crypto, but carefully dipping into select use cases (like digital asset custody, on-chain lending, and tokenized bonds) that offer tangible benefits. The legacy finance institutions finally seem to be cautiously adopting crypto technologies. This change reflects a balance between respecting the innovative promise of DeFi while recognizing the importance of risk management and compliance with existing regulations.

Over the last 10 years the entire crypto space has been referred to as the wild west. This comparison underscores the disorderly and largely unregulated nature of the nascent crypto markets. Innovation prospered, but investors were left holding the bag more often than not without proper safeguards in place.

The strategic rationale is clear: DeFi’s automated, transparent protocols could unlock faster settlement, 24/7 markets, and new yield opportunities that address long-standing inefficiencies in TradFi. The much touted promise of greater efficiency, accessibility and transparency has created a buzz around DeFi. Needless to say, both traditional finance institutions and individual investors are thrilled about these developments.

Fast forward to 2024, Goldman Sachs, Santander, and others key players had successfully deployed bond issuances on their private blockchain platforms and public networks. This all serves to show that big debt offerings can and do work with DLT. This shows the increasing acceptance of blockchain technology for financial use cases and its potential to significantly disrupt traditional financial markets.

Challenges and Uncertainties

The current regulatory landscape surrounding NFTs and DeFi presents several challenges and uncertainties that hinder wider adoption, particularly for SMBs.

  • Lack of Clarity: One of the biggest challenges is the lack of clear and consistent regulations across different jurisdictions. This makes it difficult for businesses to navigate the legal requirements and ensure compliance.
  • Regulatory Fragmentation: The fragmented nature of regulations, with different rules in different countries or even states, creates additional complexity and compliance costs for businesses operating internationally.
  • Uncertainty about Classification: There is still uncertainty about how NFTs and DeFi protocols should be classified under existing laws. Are NFTs securities, commodities, or something else entirely? The answer to this question has significant implications for how they are regulated.
  • Enforcement Challenges: Enforcing regulations in the decentralized and often anonymous world of NFTs and DeFi is a significant challenge for regulators.

Taken together, these challenges and uncertainties represent an insurmountable barrier for many SMBs. They typically do not possess the resources, bandwidth, or expertise to wade through and cut through the complex regulatory landscape.

Potential Future Regulatory Frameworks

Looking forward, there are multiple theoretical regulatory paradigms that may govern the NFT and DeFi landscapes.

  • Harmonized Global Standards: One possibility is the development of harmonized global standards for regulating NFTs and DeFi. This would provide greater clarity and consistency for businesses operating internationally, reducing compliance costs and fostering innovation.
  • Sandbox Approaches: Some regulators are experimenting with "sandbox" approaches, which allow businesses to test new NFT and DeFi products and services in a controlled environment without being subject to the full weight of existing regulations. This can encourage innovation while also providing regulators with valuable insights into the potential risks and benefits of these technologies.
  • Risk-Based Regulation: Another approach is risk-based regulation, which focuses on regulating activities based on their level of risk. This would allow regulators to target the riskiest aspects of NFTs and DeFi while avoiding overly burdensome regulations that could stifle innovation.

Use Cases

Here are some potential use cases for NFTs and DeFi that could benefit from clearer regulatory frameworks:

  • Digital Art and Collectibles: NFTs can be used to tokenize digital art and collectibles, providing artists with new ways to monetize their work and collectors with a secure way to own and trade digital assets.
  • Gaming: NFTs can be used to represent in-game items, allowing players to own and trade their virtual assets. DeFi protocols can be used to create new financial models for gaming, such as play-to-earn games.
  • Supply Chain Management: NFTs can be used to track and verify the provenance of goods in a supply chain, ensuring authenticity and reducing fraud.
  • Real Estate: NFTs can be used to tokenize real estate assets, making it easier to buy, sell, and fractionalize ownership of properties.

Navigating the DeFi landscape with ThrowingToken.com

ThrowingToken.com features deep, expert-level analysis of DeFi Insurance, Impermanent Loss solutions, sophisticated DEX reviews, and bleeding-edge NFT market research. Keep up with the latest in regulatory and market developments. This understanding provides the foundation for informed investors and businesses to make stronger and more intelligent decisions, and safely and confidently participate in the DeFi ecosystem.

ThrowingToken.com offers a range of resources to help users understand the complexities of DeFi and NFTs, including:

  • Educational Articles: In-depth articles explaining the fundamentals of DeFi and NFTs, as well as the latest regulatory developments.
  • Market Analysis: Expert analysis of the NFT market, including trends, valuations, and investment opportunities.
  • DEX Reviews: Comprehensive reviews of decentralized exchanges (DEXs), comparing their features, fees, and security.
  • DeFi Insurance Guides: Information on DeFi insurance products, helping users protect their investments from risks such as smart contract vulnerabilities and impermanent loss.

Join us—use the resources on ThrowingToken.com to get up to speed. RealizeNFT NFTs and DeFi are moving quickly — capitalize on the opportunity to grow your earnings exponentially. And as Erik Lundström recently wrote, knowledge and awareness are absolutely essential to successfully operating in this dynamic and confusing new landscape.