Understanding decentralization is essential to accurately assess your project's regulatory exposure. While the blockchain industry initially associated decentralization with the removal of intermediaries or the use of immutable smart contracts, this perspective has evolved.

Regulators and international standard-setters, including the EU under MiCA, IOSCO, and FATF, increasingly focus on actual points of control, not just technical decentralization. In this context, claiming to be "decentralized" does not automatically place a project outside regulatory scope. In fact, there is still no unified definition of decentralization under global regulation. What matters is who has the power to make meaningful decisions. Technically, operationally, or economically.

To address this regulatory gray zone, RegOp developed a structured methodology to assess decentralization based on verifiable, code-level indicators and governance realities. The main indicators that we assess are: (i) Immutability of Smart Contracts; (ii) Ownership of Smart Contracts; (iii) Roles within the Protocol; (iv) Dissemination of Power; (v) Fee Collection; and (vi) dApp Access.

Transparency is a foundational principle in evaluating the regulatory posture of a Web3 protocol, not because it is directly regulated, but because it enables verifiability, public oversight, and regulatory trust.

A transparent project makes it possible for users, developers, and regulators to independently audit how it works, both technically and operationally. While a lack of transparency may not always trigger legal consequences on its own, it often correlates with centralized control or regulatory avoidance.

Transparency is assessed across two dimensions: (1) technical/code-level openness and (2) jurisdictional/geographic visibility. Each affects how trustworthy and accessible your protocol appears to regulators and the broader public.

One of the most sensitive regulatory questions in Web3 is whether a token or the broader protocol it supports could be classified as a security. This classification brings significant obligations, including registration, disclosures, and limitations on public offerings.

While the exact legal definition of a "security" varies across jurisdictions, global regulators often converge around a few core principles: capital raising, profit expectation, and reliance on others' efforts. In RegOp, we take a cross-jurisdictional approach while aligning closely with the U.S. Howey Test, which remains one of the most strict analytical frameworks.

Virtual Asset Service Provider (VASP) classification is one of the most critical regulatory exposures your protocol may face. Depending on what your protocol does, or more precisely, what roles it enables or concentrates, it may fall under VASP definitions in jurisdictions aligned with FATF standards or regimes such as EU's MiCA Regulation.

Being classified as a VASP can trigger extensive obligations, including licensing, AML/CFT compliance, reporting, and user onboarding controls. That's why understanding which functions are performed on-chain and who controls them is essential to anticipating and mitigating VASP-related risk.

Banking risk refers to whether your protocol performs activities equivalent to those of traditional financial institutions, such as accepting deposits, issuing credit, or intermediating the flow of funds. Engaging in lending, borrowing, or liquidity provision may bring your project into scope of banking, credit, or financial services regulation.

This risk is distinct from securities exposure. Nevertheless, it often overlaps, especially when user funds are pooled and invested, or when returns are generated through a structured protocol logic resembling financial intermediation.

Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) obligations are typically imposed on licensed entities, such as VASPs, securities issuers, and financial institutions. However, even when a protocol is not yet in scope for direct regulatory obligations, it may still raise serious AML/CFT red flags based on its design, deployment practices, and operational posture.

RegOp's AML/CFT Exposure score does not assess whether a protocol is currently obligated to comply, but rather how vulnerable it is to being used for illicit finance, and whether it demonstrates proactive design choices to reduce that risk.

Gambling is a tightly regulated activity in nearly every jurisdiction. Protocols that allow users to gain or lose funds purely based on chance or probabilistic outcomes, without requiring skill, strategy, or user input, may fall within the legal definition of gambling, lottery, or gaming.

This classification can trigger strict licensing, jurisdictional restrictions, consumer protection mandates, or even outright bans, particularly where monetary stakes are involved.

RegOp evaluates gambling risk based not on intent, but on the mechanics and user experience of the protocol. Mainly, how outcomes are determined, how funds flow, and what control (if any) users have over results.

Data protection is a legal requirement for nearly every business operating globally (particularly under frameworks like the EU's GDPR, Brazil's LGPD, and the California Consumer Privacy Act). However, RegOp's focus is not to evaluate your compliance obligations as a business, but rather to assess if your protocol handles personal data on-chain.

Why? Because smart contracts are transparent by design — storing personal data directly on-chain may not only breach user privacy, but also conflict with global data protection laws that require data minimization, the right to erasure, and control over personal information.

Stablecoins (i.e. crypto-assets that aim to maintain a stable value relative to a reference asset such as the U.S. Dollar or Euro) are increasingly subject to dedicated regulatory frameworks around the world.

Whether backed by fiat, short-term government securities, or other crypto-assets, these tokens raise specific legal and prudential concerns due to their widespread use in payments, trading, and decentralized finance. As such, issuing or facilitating access to stablecoins can trigger licensing, reserve management, reporting, and consumer protection obligations.

RegOp evaluates whether your project issues, operates, or facilitates access to a token that purports to maintain price stability — regardless of whether you label it a "stablecoin" or not.