In the wake of the tumultuous 2024 U.S. election cycle, the Decentralized Finance (DeFi) sector finds itself at a crossroads. With over $100 million in crypto spending across races and the victory of a perceived pro-crypto administration, the regulatory outlook has shifted in ways that may surprise some. Amidst the headlines and market euphoria, those in the crypto industry must refocus on how to navigate this new landscape in Washington.
Transcending Party Lines
As Rebecca Rettig, Chief Legal & Policy Officer at Polygon Labs, reflected on her recent testimony before the House Financial Services Subcommittee on Digital Assets, she emphasized that the path forward cannot be one of partisan politics. The discourse must center on how the industry assumes its new role in shaping policy.
Innovation, consumer protection, and financial inclusion are not Republican or Democratic values—they are American values.
– Rebecca Rettig, Chief Legal & Policy Officer, Polygon Labs
The election results, particularly in races where crypto policy played a decisive role, demonstrate that voters across party lines are galvanized by these issues. To forge common ground, the industry and policymakers must focus on three key initiatives:
1. Prioritizing Education
With new faces arriving in Congress and committee assignments in flux, the mandate for basic DeFi education becomes even more crucial. When policymakers understand the technology, they are more likely to support it, as evidenced by the victory margins of pro-crypto candidates who took the time to learn the fundamentals.
As regulators and U.S. policymakers begin to engage with DeFi, the industry must do more to educate and involve their representatives. Founders and builders need to personally speak about their work to put a tangible face to the amorphous “DeFi”.
2. Building Useful Applications
During the congressional hearing, representatives inquired about financial and non-financial use cases. Rettig highlighted The Value Prop, an open database cataloging use cases for blockchain-based applications across crypto networks. If the industry only chases the pump, it will never demonstrate the transformative value of DeFi.
Policymakers must also grapple with why this technology matters. Rep. Mike Flood (R-NE) underscored its revolutionary potential, focusing on its ability to redistribute power—allowing individuals to take ownership of their data, assets, and content without intermediaries.
3. Keeping DeFi Safe
Bad actors exist everywhere, in DeFi and TradFi alike. But one of DeFi’s inherent features—transparency and real-time data availability on transactions—is also its greatest advantage in creating a safer system compared to the traditional financial world.
As an industry, we can fight hackers and return stolen funds even without intermediaries. Rettig co-authored a paper earlier this year offering a three-part framework to combat illicit finance in DeFi. The industry must continue to innovate on security, while policymakers need to learn that it’s possible to adapt existing financial laws to intermediary-free systems.
The future of DeFi regulation requires nuanced understanding and deep collaboration. Industry leaders and informed regulators, better use cases, and system security are essential to realizing the long-term benefits of this technology. The United States has the opportunity to lead, but only if we approach DeFi with the nuance and foresight it deserves.
