Regulatory risk

DeFi faces the regulatory risk. Some of them won't be accepted by the local laws.

There are at least two types of digital asset “securities”:

1. Tokens that represent traditional securities like stocks and bonds
2. Investment contracts

Some countries, like US, don't allow the first one.

Howey test

Howey test helps retail investors to check whether the investment contracts is safe.

An investment contract for the purposes of the Securities Act (SEC) means:

A contract, transaction or scheme whereby a person invests his money in a common enterprise and has led to expect profits solely from the efforts of the promoter or third party.