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Opinion by: Aaron Basi, head of product at IoTeX

As we look into the rest of 2025, the political climate suggests a friendlier stance toward crypto, with promises of regulatory clarity from both major parties in the United States. While this shift is welcoming news for Web3, one sector stands out as needing special attention: decentralized physical infrastructure networks (DePIN). 

DePIN projects represent an emerging $38.4-billion sector. They are not your typical crypto projects. DePIN projects bridge blockchain incentives with real-world infrastructure, enabling everyday users to monetize their own electronic devices at will. Many crypto veterans tend to shun regulation, arguing that it stifles innovation or inhibits day-to-day freedoms. DePIN’s unique hybrid nature demands a strong framework to protect and channel trust so its transformative potential can be fully realized.

What sets DePINs apart?

DePINs create a self-sustaining economy where participants are directly compensated for their contributions to the network. That makes DePIN uniquely suited to address industries that depend on digital innovation and physical presence, such as geolocation, decentralized storage and Internet-of-Things connectivity. Such a hybrid nature also presents challenges, as it defies the logic of existing regulatory structures and requires new rules. 

The challenges DePIN faces 

DePIN projects generate real economic value right from the get-go. Geodnet, a relatively recent project, has already achieved around $1 million in annual recurring revenue (ARR) through its satellite miners. The broader DePIN ecosystem already reports over $15 million in ARR. This tangible success highlights the sector’s economic viability, but the urgent need for apparent oversight comes with that.

DePIN networks often require access to data from user devices to function effectively, be it geolocation data for precision mapping or storage capacity for decentralized cloud solutions. Without clear guidelines, users and operators alike remain uncertain about the boundaries of data collection. How much data can DePIN protocols access? What protections exist to ensure privacy and prevent misuse? Without answers, users may hesitate to participate, thus limiting network growth.

DePIN networks rely on tokens to reward users for contributing their devices or data. Again, without regulatory clarity, questions arise around fair compensation. How should user contributions be valued, especially when their devices are critical to the network? A lack of standardization may lead to predatory practices, eroding trust in the ecosystem.

DePIN networks promise decentralization, but early-stage projects often rely on centralized leadership for decision-making, creating transparency gaps in governance and revenue distribution. Some DePIN projects fail to disclose their governance structures or decentralization roadmaps, leaving stakeholders unsure of who controls the network and how the project shares revenue with its users. This opacity undermines the sector’s foundational principles and could deter participation from users seeking genuinely decentralized systems. A tailored regulatory framework can address these issues by incentivizing transparency. 

Traditional regulations often treat physical infrastructure and digital currencies as separate domains, with little regard for DePIN’s hybrid nature. For example, publicly traded Web2 companies must disclose revenue, while Web3 transactions are typically visible onchain. But what if a theoretical DePIN project makes millions in revenue, keeps that information private, and only rewards users with a few thousand dollars onchain? What if users already made substantial contributions with their physical devices, only for project tokenomics to change substantially? Such unanswered questions create operational and compliance risks for everyday users.

The need for regulation

Developing a robust regulatory framework for DePIN is essential to unlocking its potential as a transformative force in technology and infrastructure. Regulators must embrace a nuanced approach that addresses the complexities of DePIN’s hybrid nature. 

Recent: Here’s why users should keep data on DePIN devices instead of cloud services

With its tradition of embracing innovation, the US has the opportunity to lead this sector by crafting tailored regulations that set a global benchmark, ensuring that both accountability and innovation thrive in the DePIN ecosystem. By acting decisively, regulators can position DePIN as the foundation of a hybrid and decentralized future. The benefits extend far beyond technology. It’s a regulatory challenge and a once-in-a-generation opportunity to redefine how economies and societies operate. Let’s seize this moment to craft a framework that enables DePIN to thrive, ensuring a decentralized, inclusive and prosperous Internet-of-Things realm.

Aaron Basi is the head of product at IoTeX. Aaron holds a Bachelor of Business Administration from SFU’s Beedie School of Business, completed UBC’s Blockchain Summer Institute Program, and is certified as a professional scrum product owner. 

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.