The 2024 election cycle has resulted in a deeply shaken-up political landscape for digital finance. With over $100 million in crypto industry spending across races and Trump's victory ushering in promises of a pro-crypto administration, the regulatory outlook has shifted in ways that may startle some. Amidst the headlines and market euphoria — Bitcoin surging past $90,000 after election night — we in the crypto industry need to refocus. The way forward cannot be about partisan politics. The discourse must center around how our industry steps into its new role in Washington.
Two months ago, I found myself before the House Financial Services Subcommittee on Digital Assets. That hearing now feels like a snapshot from a different era — before an election cycle that saw crypto emerge as a genuine campaign issue, complete with pledges for a national Bitcoin stockpile and promises to reshape regulation. What began as a technical discussion about DeFi's fundamentals has grown into a debate about America's role in the future of finance.
While the election has brought changes to key committees, including Financial Services, the fundamentals of responsible DeFi oversight shouldn't shift with political winds. Innovation, consumer protection, and financial inclusion are neither Republican nor Democratic values — they're American ones. The election results, particularly in races where crypto policy played a decisive role — like Bernie Moreno's victory over Sherrod Brown in Ohio — prove that voters across party lines are fueled into action by these issues.
For me, "representing DeFi" once meant advising small startups housed in Brooklyn apartments. Then, decentralized finance was largely an emerging movement within the larger crypto industry that foregrounded how decentralized software can upend many of our daily financial activities. Many of those building then could not have fathomed that this would become a central campaign issue, with candidates actively courting industry support and debating the future of digital assets.
The election results have amplified what we began to see in September's hearing: crypto's ability to transcend traditional political divisions. When Rep. Wiley Nickel (D-NC) opened that session by declaring: "DeFi [...] can make our financial system more accessible, transparent, efficient, and innovative." In seeking “common ground in supporting both innovation and consumer protection,” he was previewing themes that would reshape campaign narratives across the country and serve as a guide for how crypto must emerge as a rare point of bipartisan cooperation in a polarized political climate.
We can achieve this common ground through three critical initiatives — with mutual effort by industry and policymakers:
First, education. With new faces arriving in Congress and committee assignments in flux, the September DeFi hearing's basic education mandate becomes even more crucial. This election cycle showed that when policymakers understand our technology, they're more likely to support it—evident in the victory margins of pro-crypto candidates who took time to learn the fundamentals.
Industry jargon is esoteric. For example, “wallets” aren’t leather billfolds (they’re more like email) and smart contracts – the software comprising DeFi – are neither “smart” nor “contracts”. To that end, I dedicated part of my written testimony to breaking down DeFi technology. Others who testified provided powerful analogies – the telegraph and switchboard operators – to demonstrate how other useful technology has evolved to eliminate intermediaries and provide better, more efficient systems.
Even as other U.S. regulators and policymakers begin engaging with DeFi, the industry must do a better job educating and engaging with their own representatives.
In addition to excellent DeFi policy advocates like the DeFi Education Fund and Coin Center, who also had representatives at the September hearing, founders and builders must speak personally about their work to give amorphous “DeFi” a tangible face. And policymakers must take time to understand the technology — who uses and benefits from it — before enacting regulation. That’s the same approach taken the world over — more time for analysis, exploration and innovation.
Second, build useful applications. During the hearing, representatives asked about financial and non-financial use cases. It was a privilege to answer questions and discuss The Value Prop, an open database cataloging use cases for blockchain-based applications across all crypto networks, like Ethereum, Bitcoin and more. I’ll say the quiet part out loud: For many, speculation is fun. But if the industry only chases the pump, it will never demonstrate the transformative value of DeFi.
Just as we must build meaningful use cases, policymakers must grapple with the reasons this technology matters. Rep. Mike Flood (R-NE) emphasized its revolutionary potential, zeroing in on its ability to redistribute power: Individuals can take ownership over their data, assets, and content, sans intermediaries.
Decentralizing legacy systems piqued my interest years ago in a Williamsburg loft with a four-person DeFi startup that built one of the world’s preeminent protocols.
I remain optimistic that we are building – as Rep. Nickel said – a system for “everyone.”
Third, keep DeFi safe. Bad actors are everywhere, in DeFi and TradFi alike. It was hard to miss certain representatives’ focus on this issue at the September hearing.
But one of DeFi’s inherent traits — transparent, real time data about transactions — is also its greatest asset in creating a safer system than the traditional financial world.
Is it possible to trace or track all illicit activity in DeFi? No. And it can’t be done in TradFi, either.
But as an industry, we can combat hacks and return stolen funds even without intermediaries. One (foreign) regulator told me months ago that TradFi excels in coming together to propose solutions to new problems — and that crypto should be doing the same. I co-authored a paper offering one such solution earlier this year — a three-part framework for combating illicit finance in DeFi
There are grassroots security efforts to ensure the system operates as safely as possible, like ZachXBT, the Security Alliance and others. And it’s important that this technology's utility is not overshadowed — even in narrative alone — by a few (high profile) bad actors.
Put simply, the industry must still innovate on security, while policymakers need to learn that it isn’t possible to map existing financial laws onto intermediary-less systems.
The future of DeFi regulation requires nuanced understanding and deep collaboration. Knowledgeable industry leaders and regulators, better use cases, and system security are essential to achieving the long-term benefits of this technology. The U.S. has an opportunity to lead, but only if we approach DeFi with the nuance and forward-thinking it deserves.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.