According to Foresight News, the European Securities and Markets Authority released a report outlining the multiple risks that DeFi poses to investors and financial stability. The report divides smart contracts into five categories, including financial, operational, tokens, wallets, and infrastructure, to help regulators understand the "huge technical complexity of these systems." The report stated that although investors' exposure to DeFi is still small, investor protection faces serious risks due to the highly speculative nature of many DeFi arrangements, serious operational and security vulnerabilities, and the lack of clear responsible parties. The independent EU agency warned that DeFi operates without trusted intermediaries and warned against the prevailing "code is law" principle, claiming that this principle has permeated existing DeFi governance and that compliance with this principle will result in a tendency to accept the results of smart contracts "without regard to any ethical or legal considerations."

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