Abstract
Decentralised finance (DeFi) is rapidly transforming financial services through the use of smart contracts and blockchain technology. The exponential growth of DeFi has attracted significant attention from both researchers and policymakers, highlighting its potential to disrupt traditional finance. However, regulating DeFi presents unique challenges due to its complexities around decentralisation, permissionless nature and trans-jurisdictional reach, creating governance difficulties reminiscent of those found in offshore jurisdictions. To conceptualise these issues, this article develops and applies a novel two-part analytical framework derived from the study of offshore finance. The framework integrates a mapping of core functional mechanisms (e.g., regulatory arbitrage, asset opacity) with a layered architectural model that distinguishes between a foundational settlement layer and an application layer where business entities operate. Our analysis reveals that while regulatory challenges manifest at the application layer, their persistence is enabled by the de-territorialised and competitive nature of the underlying settlement layer. The article contributes to financial geography by providing a robust analytical framework for DeFi, using it to deliver a nuanced analysis of its unique spatial dynamics, and drawing concrete, cautionary lessons for future regulation.