Regulation: The Biden administration threatens the future of DeFi

DeFi is at a critical crossroads. Recently, the US administration has taken regulatory actions against it. Measures that could redefine the future of DeFi and financial self-management, according to some experts.

Aggressive DeFi Regulation in the United States

US regulators have stepped up their offensive against the decentralized finance sector in April. These regulatory attacks have raised serious questions about the Biden administration’s intentions regarding DeFi.

In this regard, Matthew Sigel, expert at VanEck, did not mince words:

 “The government is rushing to make DeFi functionally illegal before the next election.” 

These regulatory offensives have been marked by several controversial actions.

• Firstly, the SEC issued a warning to the Uniswap Foundation alleging that this DeFi platform was operating an unregistered exchange.
• Next, the IRS proposed to significantly broaden the definition of brokers, essentially encompassing unhosted wallets used for personal custody.
• Finally, the SEC provided a warning letter to ConsenSys regarding MetaMask, one of the most popular decentralized wallets. This strong regulatory approach directly targets tools that allow users to hold and control their own cryptocurrencies.

A Cooling in the Crypto Sector

According to Matthew Sigel, these regulatory actions have largely contributed to a cooling of investor enthusiasm for digital assets in April. In an already uncertain macroeconomic context, the regulatory tightening destroys the confidence of traditional investors in the cryptocurrency sector.

Many experts are also worried about the long-term consequences of this regulatory war against DeFi and self-management. By making these innovations nearly illegal, the Biden administration could:

• hamper the adoption of cryptocurrencies,
• deprive the United States of a major competitive advantage in the race for financial innovation.

As political debate rages on the regulation of cryptocurrencies, the Biden administration is adopting an aggressive approach to DeFi. By multiplying restrictive measures, US regulators are sowing doubt and confusion within this booming industry.