At a recent hearing, House Financial Services Subcommittee Chairman French Hill stressed the importance of understanding decentralized finance (DeFi) technologies and criticized the Biden administration’s current regulatory approach. Hill urged Congress to foster open discussions to support innovation in DeFi, noting that existing regulations were created for a financial system dependent on centralized intermediaries, which contrasts with the decentralized, peer-to-peer ecosystem enabled by digital assets and blockchain technology.
The hearing, titled “Decoding DeFi: Breaking Down the Future of Decentralized Finance,” was part of an ongoing series led by Hill, who chairs the Subcommittee on Digital Assets, Financial Technology, and Inclusion. The session aimed to assess the opportunities and risks presented by DeFi technologies.
In his opening statement, Hill highlighted DeFi’s potential to reshape financial markets, describing it as a “permissionless, transparent, and efficient financial system built on blockchain networks.” He emphasized the need for updated regulatory frameworks to support this evolving technology, explaining that current laws do not account for the decentralized nature of DeFi.
“Our regulatory frameworks were designed for a system with centralized intermediaries,” Hill said. “They don’t contemplate the peer-to-peer structure that blockchain and digital assets enable.”
Hill also referenced the Financial Innovation and Technology for the 21st Century Act (FIT21), which seeks to study decentralized ecosystems further. He criticized the Biden administration for its handling of the crypto sector, accusing it of stifling DeFi with enforcement actions and rulemaking. “The Biden-Harris Administration is using regulations to clamp down on DeFi,” Hill argued.
The hearing came as the administration sends mixed signals about DeFi regulation. While the session aimed to advance understanding of DeFi, various regulatory measures have raised concerns about a lack of a unified policy. For instance, the FBI recently warned of North Korean cyber threats targeting DeFi platforms, while the Commodity Futures Trading Commission (CFTC) took enforcement action against Uniswap Labs.
These regulatory moves, critics say, reflect an inconsistent stance on DeFi from the administration. Hill called for clearer, coordinated efforts to regulate the space while preserving innovation.
The hearing also included testimony from experts like Amanda Tuminelli of the DeFi Education Fund and Peter Van Valkenburgh of Coin Center, who discussed the need for clearer guidelines to help the industry comply with laws.
Hill expressed optimism that Congress could craft a regulatory environment that supports DeFi’s growth while ensuring financial stability and consumer protection. He encouraged lawmakers to engage in informed discussions to find balanced solutions for safely leveraging this transformative technology.
