First hearing on DeFi in the U.S. Congress
Although Bitcoin and other cryptocurrencies weren't mentioned in yesterday's TV debate between Donald Trump and Kamala Harris, crypto did at least grab the spotlight on another political stage.
Although Bitcoin and other cryptocurrencies weren't mentioned yesterday in the TV debate between Donald Trump and Kamala Harris, crypto did at least grab the spotlight on another political podium. The first hearing on the topic of decentralized finance (DeFi) in the U.S. kicked off with a Finance Committee meeting on September 10.
The goal of the session, titled “Decoding DeFi: Breaking Down the Future of Decentralised Finance” in the House of Representatives, was to explore emerging topics like tokenization and the use of blockchain in the financial world. As it turned out, the topic splits the crypto camps in the U.S. along party lines.
Historical moment
Regardless of the debate, the crypto community should pause to mark this moment. Only four years ago, DeFi was a minor, obscure part of crypto, with shady projects, wild yields, and lots of scams. Now, American senators are debating the potential adoption of the technology to improve the financial system.
The well-known crypto advocate and board member of the DeFi Education Fund, Jake Chervinsky, summed it up in a View post on X. “Honestly, I’m emotionally drained after today’s very first DeFi hearing in Congress. I remember a few years ago there were only about ten DeFi projects most people didn’t see as having a future. And now they’re being presented in the halls of power in Washington DC.”
DeFi well represented
Among the witnesses were top legal experts in the crypto sector, including the CLOs of Polygon and the DeFi Education Fund, as well as Coin Center’s Director of Research, Peter Van Valkenburgh. All of them managed to paint a favorable picture of the sector in their opening statements. Amanda Tuminelli, Chief Legal Officer of the DeFi Education Fund, emphasized that traditional financial systems often rely on intermediaries who act as gatekeepers. DeFi, by contrast, offers “open access” and thus promotes financial inclusion for everyone.
Further, most witnesses advocated more regulatory clarity. Regulators have left the sector in the dark about how to comply with rules, leaving it in a gray area. This reinforced the sentiment of a sector that has repeatedly complained about arbitrariness and over-regulation. At the same time, there was pushback against imposing strict anti-innovation rules on the emerging sector, aimed at anti-money-laundering practices and full oversight of Web3 users.
Regulation yes, supervision no
Some members of Congress pointed to the alleged use of blockchain for tax evasion. Van Valkenburgh countered this claim forcefully. According to him, it’s hard to bypass regulators when you’re using a public, transparent, decentralized ledger because all transactions can be viewed at any time. Members of the so-called “Crypto Caucus” also stressed that criminals prefer traditional financial systems to move billions in illicit proceeds.
Witness Mark Hays, senior policy adviser at Americans for Financial Reform, described the crypto and DeFi industry as “highly volatile, fraud-prone and extremely predatory.” He also called for more regulation, but applied to DeFi under current securities laws.
Red vs. Blue
Beyond the constructive debate, the disagreement between Republican and Democratic lawmakers remained the dominant tone of the hearing. Republican subcommittee chair French Hill took a clear stance in his opening remarks. “By replacing intermediaries with autonomous, self-executing code, DeFi can change how financial markets and transactions are structured and governed today.”
Democratic Congressman Brad Sherman, on the other hand, countered that DeFi is mainly used for crime, sanctions evasion, and tax dodging. “What we’re seeing here is an attempt to immunize billionaires from income taxes,” Sherman said.
The political tension was also reflected in the remarks by Congresswoman Maxine Waters. “While DeFi is meant to create more efficiency and transparency, it can also bring increased risks of hacks, fraud, misinformation, and conflicts of interest that can harm consumers and investors,” Waters said. “We’ve already seen this with the new DeFi project that Eric Trump and Donald Trump Jr. are planning, called World Liberty Financial.”
