Designing a RegTech Framework for Monitoring Liquidity Concentration Risk in Decentralized Exchanges: Insights from the USDC/ETH Pool on Uniswap V۳

The rapid expansion of Decentralized Finance (DeFi) has transformed digital financial markets by replacing traditional intermediaries with blockchain-based protocols and automated smart-contract infrastructures. Among the most influential innovations in DeFi are decentralized exchanges (DEXs), which facilitate trading through Automated Market Makers (AMMs) and liquidity pools. While the introduction of concentrated liquidity in Uniswap V۳ has significantly improved capital efficiency, it has simultaneously created new forms of liquidity concentration that may affect market resilience, transparency, and governance outcomes. This study develops a blockchain-native Regulatory Technology (RegTech) framework for monitoring liquidity concentration risk in decentralized exchanges. Using insights from the USDC/ETH liquidity pool on Uniswap V۳, the article conceptualizes liquidity concentration as a supervisory and governance concern rather than merely an efficiency-related market characteristic. The proposed framework integrates on-chain data acquisition, concentrationanalytics, supervisory intelligence mechanisms, and regulatory reporting functions to transform transparent blockchain data into actionable supervisory insights. To support continuous monitoring, the study introduces a conceptual Liquidity Concentration Risk Index (LCRI) that combines multiple concentration dimensions, including the Herfindahl–Hirschman Index (HHI), concentration ratios, liquidity withdrawal sensitivity, and liquidity stability measures. The framework further maps international regulatory principles related to financial stability, market integrity, transparency, operational resilience, and investor protection into blockchain-native supervisory functions. The study contributes to the literature by extending RegTech research into decentralized financial ecosystems, reframing liquidity concentration as a structural supervisory risk, and proposing a monitoring architecture compatible with the decentralized nature of DeFi markets. The findings suggest that effective supervision in decentralized environments should emerge from continuous interpretation of on-chain data and may strengthen market transparency, governance quality, and trust capacity within digital financial ecosystems. Enhanced transparency and concentration monitoring may also contribute to the emergence of self-generating trust mechanisms that support long-term resilience, legitimacy, and sustainable governance in decentralized financial markets.

کلیدواژه ها:

Decentralized Finance (DeFi) ، RegTech ، Liquidity Concentration Risk ، Automated Market Makers ، Uniswap V۳.