Safeguarding DeFi's Foundations: Protecting the Builders of Decentralized Finance Infrastructure

Welcome to Crypto Long & Short, our institutional newsletter. This week, we focus on the need to protect the people driving DeFi innovation. Jennifer Rosenthal, chief communications officer at the DeFi Education Fund, emphasizes the importance of preserving the technology and infrastructure that underpin DeFi. Key policy objectives include protecting software developers from misclassification under criminal law. The Promoting Innovation in Blockchain Development Act, introduced by Representatives Scott Fitzgerald, Ben Cline, and Zoe Lofgren, aims to clarify that Section 1960 applies only to those controlling customer assets and transmitting funds on behalf of customers. Meanwhile, Alexis Sirkia, chairman and co-founder of Yellow Network, argues that Ethereum's scaling problem stems from a fundamental design flaw, with the rollup model failing to deliver unified scaling due to its focus on throughput rather than value movement between participants. State channels offer an alternative, allowing peer-to-peer transactions off-chain with the base layer serving as the enforcement mechanism. As the CFTC prepares to approve the first U.S. framework for perpetual futures, the need for infrastructure that can settle cross-chain in real-time without custodial chokepoints becomes increasingly pressing. The market is shifting towards solutions that eliminate intermediary trust, and builders are migrating towards infrastructure that prioritizes security and scalability.