Shielding DeFi's Infrastructure Builders: A Call to Action

Welcome to Crypto Long & Short, our institutional newsletter. This week, we focus on protecting the creators of DeFi infrastructure. As traditional finance companies increasingly embrace DeFi, it's crucial to defend the technology and its developers. The DeFi Education Fund, a nonpartisan nonprofit, invites you to join us in promoting policy objectives that support DeFi's growth. Recently, the bipartisan Promoting Innovation in Blockchain Development Act was introduced to protect software developers from misclassification under criminal code. This legislation clarifies that Section 1960 applies only to those controlling customer assets, aligning with congressional intent and regulatory interpretation. In a separate article, Alexis Sirkia argues that Ethereum's scaling issue stems from a flawed assumption that the limitation is throughput, when in fact, the constraint lies in how value moves between participants. He proposes state channels as a solution, enabling peer-to-peer transactions off-chain with the base layer serving as the enforcement mechanism. Meanwhile, the CFTC is set to approve a framework for perpetual futures, which will shift a significant share of offshore derivatives volume into regulated venues. The infrastructure to support this shift must settle cross-chain in real-time without custodial chokepoints, rendering rollups unsuitable for the task. This week's headlines highlight the growing connections between traditional finance and crypto, as well as the devastating impact of smart contract exploits.