Preprint Systematizes Web3 RegTech Solutions and Highlights Compliance Gaps

Global: Preprint Systematizes Web3 RegTech Solutions and Highlights Compliance Gaps

A recent preprint posted on arXiv in December 2025 presents a systematic examination of regulatory‑technology (RegTech) tools designed for decentralized Web3 ecosystems, focusing on anti‑money‑laundering (AML) and counter‑financing of terrorism (CFT) compliance. The authors aim to map emerging capabilities, assess current deployments, and identify gaps that hinder effective oversight.

Frameworks and Taxonomies

According to the study, three interrelated taxonomies structure the Web3 RegTech domain: a regulatory‑paradigm evolution framework spanning ten dimensions, a compliance‑protocol taxonomy comprising five verification layers, and a RegTech lifecycle model that covers preventive, real‑time, and investigative phases. These classifications are intended to guide both academic inquiry and industry development.

Industry and Academic Landscape

The analysis draws on 41 operational commercial platforms and 28 academic prototypes identified through a systematic literature review covering the period 2015‑2025. This dual‑sided dataset allows the authors to compare real‑world adoption with experimental research, revealing a notable disparity between prototype innovation and market rollout.

Key Capabilities Enabled by Web3 RegTech

Researchers highlight several capabilities that become feasible within blockchain‑native environments, including transaction‑graph analysis, real‑time risk assessment, cross‑chain analytics, and privacy‑preserving verification methods. These functions are described as difficult to achieve or less commonly deployed in traditional, centralized financial systems.

Identified Gaps and Ongoing Challenges

The paper points to persistent obstacles such as cross‑chain tracking, analysis of decentralized finance (DeFi) interactions, monitoring of privacy‑enhancing protocols, and scalability of compliance solutions. The authors argue that these challenges limit the effectiveness of current RegTech implementations.

Best Practices and Future Research Directions

Based on the synthesis of architectural patterns, the authors propose best‑practice guidelines that respect Web3’s core principles of decentralization, transparency, and user sovereignty. They also outline research avenues aimed at bridging the gap between academic prototypes and commercial deployment, with particular emphasis on interoperable standards and performance optimization.

Implications for Stakeholders

Finally, the study suggests that regulators, platform operators, and technology providers may benefit from adopting the presented frameworks to enhance oversight while preserving the innovative potential of decentralized networks. The authors caution that coordinated effort will be essential to align regulatory expectations with technical realities.

This report is based on information from arXiv, licensed under Academic Preprint / Open Access. Based on the abstract of the research paper. Full text available via ArXiv.