Welcome to Crypto Long & Short, our institutional newsletter. This week, we discuss the need to safeguard the people building DeFi infrastructure. As traditional finance companies increasingly adopt DeFi-related initiatives, it's crucial to protect the technology and infrastructure that make it valuable. The DeFi Education Fund, a nonpartisan organization, invites you to join in defending key policy objectives.
Recent discussions with Congressional leaders have highlighted the importance of protecting software developers who write code but do not control other people's money. The bipartisan Promoting Innovation in Blockchain Development Act of 2026 aims to clarify that Section 1960 applies only to those controlling customer assets and transmitting funds on behalf of customers. Meanwhile, Ethereum's L2 strategy is facing challenges due to a fundamental design flaw. The rollup model was designed to address congestion but has resulted in fragmented liquidity pools that can't interact without routing assets through bridge infrastructure.
State channels offer a potential solution by allowing participants to transact peer-to-peer off-chain, with the base layer serving as the enforcement mechanism. As the industry continues to evolve, it's essential to support legislative and regulatory initiatives that foster clarity and enable responsible participation in both centralized and decentralized markets.