2025, Vol. 8, Issue 2

Digital asset platforms, which range from centralised exchanges to increasingly hybridised rails that link decentralised protocols and traditional finance, present a recurring policy conundrum: how to stop financial crime without impeding technological advancement or keeping vulnerable groups out of financial services. In order to function well in the era of digital assets, this paper contends that current AML/CFT frameworks—which were created for the architecture of traditional finance—need to be both conceptually and practically redesigned. I present the Inclusion-Integrity-Innovation (I³) model as an organising principle that centres regulatory design around results and proportionality. In terms of methodology, the study uses a targeted mixed-methods approach that includes semi-structured interviews with regulators, VASP compliance officers, and financial inclusion advocates in addition to a structured comparative analysis of regulatory regimes in eight to ten jurisdictions. The results highlight three key dynamics: (1) market entry and small-value access are significantly impacted by rule clarity and proportionality; (2) interoperable, privacy-preserving technical standards can minimise compliance friction while maintaining investigatory utility; and (3) lower-capacity jurisdictions are disproportionately burdened by global governance asymmetries, which are fuelled by standard-setting authorities and geopolitical pressures. In order to balance the trade-offs between innovation, inclusivity, and integrity, the paper ends with practical policy proposals at the international, national, and industry levels. These recommendations emphasise layered KYC, outcome-based international guidance, and investment in digital public infrastructure.