Emerging Risks in Fintech and Digital Assets: Ownership, Transaction, and Compliance Risks in Decentralized Finance

Abstract

The rapid growth of decentralized finance (DeFi) has introduced novel digital assets whose on-chain ownership logic diverges significantly from traditional property and securities law frameworks. This conceptual study systematically examines the emerging risks arising from this legal-technological disconnect across three dimensions: ownership, trading, and compliance. Through an integrated literature review, the paper develops a causal risk transmission framework linking four interconnected layers-operational vulnerabilities in DeFi systems, ownership indeterminacy of digital assets, transaction and market distortions, and compliance gaps stemming from regulatory fragmentation. The analysis demonstrates that technical failures (e.g., compromised private keys, smart contract exploits) trigger ownership disputes that courts cannot remedy, which in turn amplify market volatility and create arbitrage opportunities across fragmented national regimes. The paper proposes institutional remedies including harmonised legal definitions, technical resilience standards, cross-border enforcement cooperation, and adaptive regulatory modalities. While conceptual in nature, the framework provides a foundation for empirical testing and offers practical guidance for policymakers seeking to close the gap between technological innovation and regulatory response. The findings underscore that without coordinated international action, the self-reinforcing cycle of risk transmission will persist, undermining both market stability and user protection in the digital asset ecosystem.