Democrats propose ‘restricted list’ for DeFi protocols, sparking outcry
Democrat Senators have written a counter-proposal to market structure frameworks in place, which may restrict DeFi innovation and push innovators offshore, industry pundits warn.
A controversial legislative proposal introduced by several Democratic Senators has proposed the establishment of a “restricted list” targeting specific decentralized finance (DeFi) protocols. This counter-proposal to existing market structure frameworks has ignited widespread concern among industry participants, who warn it could stifle innovation and drive cutting-edge projects offshore.
The restricted list concept involves regulatory bodies identifying and limiting access to certain DeFi protocols deemed too risky or non-compliant. Critics argue this approach disproportionately penalizes decentralized networks that operate outside traditional centralized controls but are essential drivers of blockchain innovation.
Concerns Over Impact on Innovation and Competitiveness
Industry experts highlight that imposing restrictive measures risks undermining the U.S.’s leadership in blockchain development by deterring entrepreneurs and developers. Many fear such policies could mirror overly prescriptive regulation that hampers experimentation and decentralized innovation.
Furthermore, skeptics contend that restricting protocols rather than addressing systemic risks through technology-neutral principles may create regulatory arbitrage opportunities. Innovators might relocate to jurisdictions with more favorable frameworks, eroding the domestic crypto ecosystem.
Calls for Balanced Frameworks and Stakeholder Dialogue
Advocates for decentralized technology urge lawmakers to engage with the community to design balanced regulations that protect consumers and markets without inhibiting growth. Highlighting the nuanced nature of DeFi, they emphasize tailored solutions that consider technical complexities and decentralized governance models.
The ongoing debate underscores the challenges facing regulators as they seek to harmonize oversight with technological advancement and maintain the U.S. as a competitive hub for blockchain innovation.
Original Source
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