Regulation of DeFi at the US Congress: the details

On Tuesday, an important hearing of the subcommittee for digital assets of the Financial Services Committee of the US Congress was held, with the regulation of DeFi (decentralized finance) at the center of the debate. 

The DeFi is revolutionizing the world of global finance, offering new opportunities but also raising multiple challenges, especially in terms of regulation and security.

During the hearing, legislators discussed how to address these complex issues, highlighting the need to create a clear and secure regulatory framework for DeFi. 

The deputy Maxine Waters, a Democrat from the House Financial Services Committee, has taken a particularly critical stance, directing strong criticism at crypto projects like World Liberty Financial, supported by former President Donald Trump.

The growing importance of DeFi in the US Congress

In recent years, DeFi has become one of the main concerns for US lawmakers and regulators. DeFi, short for decentralized finance, uses blockchain to eliminate traditional intermediaries such as banks and financial institutions, allowing direct transactions between users through smart contracts. 

This has led to a rapid growth of the sector, which, however, is accompanied by significant risks, including money laundering, fraud, and tax evasion.

In the US Congress, the regulation of DeFi has been the subject of heated discussions, with some legislators viewing decentralized finance as an opportunity for financial innovation, while others express concerns about the lack of controls and oversight.

During the hearing on Tuesday, the members of the subcommittee explored ways in which the government could implement stricter regulations to ensure investor protection and the stability of the financial system, without stifling technological innovation. The goal is to find a delicate balance between promoting innovation and protecting users from associated risks.

The criticisms of Maxine Waters towards the World Liberty Financial project

One of the most significant moments of the hearing was the strong criticism by Representative Maxine Waters towards World Liberty Financial, a crypto project closely linked to former President Donald Trump. Waters, one of the leading Democratic voices in financial services regulation, accused the project of being a potential threat to economic stability and investor security.

According to Waters, projects like World Liberty Financial can take advantage of the lack of clear regulation to operate outside the boundaries of traditional norms, exposing participants to the risk of significant losses. 

His main concern is that the growing popularity of crypto projects of this type could push more and more people to invest in unregulated and high-risk financial instruments, compromising trust in the financial system as a whole.

Additionally, Waters emphasized how the connection of projects like World Liberty Financial with influential political figures, such as Donald Trump, can further complicate efforts to effectively regulate DeFi. According to the congresswoman, it is essential to maintain a rigorous approach to prevent cryptocurrencies from being used as tools of manipulation or for illicit purposes.

The necessity of a clear regulatory framework for DeFi

The hearing on Tuesday highlighted the growing pressure on the US Congress to develop a clear and adequate regulatory framework for DeFi. Industry experts and legislators agree that, without timely action, the risks associated with decentralized finance could multiply.

One of the most delicate aspects of DeFi regulation is its decentralized nature. While traditional financial institutions can be controlled and regulated through specific bodies, DeFi operates in an ecosystem devoid of centralized governance, making it difficult to apply traditional laws. 

However, many legislators believe that it is possible to find innovative solutions, such as the creation of specific requirements for DeFi service providers or the obligation of transparency for platforms that manage digital assets.

The hearing on Tuesday represented an important step towards this goal, but the road to a complete regulation of DeFi is still long and complex. 

The words of Maxine Waters and the criticisms towards projects like World Liberty Financial highlight how urgent it is to find a solution that addresses the challenges posed by decentralized finance, while at the same time protecting the integrity of the USA financial system.