Welcome to Crypto Long & Short, our institutional newsletter. This week, we explore the need to safeguard the individuals building DeFi infrastructure. By Jennifer Rosenthal, chief communications officer at the DeFi Education Fund, we learn about the growing understanding of open-source, permissionless, programmable, noncustodial, globally accessible, and interoperable technology as a major upgrade for parts of the financial system.
The DeFi Education Fund invites those new to DeFi, intending to rely on DeFi, or wanting to connect customers to DeFi to join in protecting the technology and infrastructure that makes it valuable. High-level policy objectives worth defending include protecting software developers who do not control other people's money from inappropriate misclassification under criminal code. The Promoting Innovation in Blockchain Development Act of 2026, 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.
As blockchain technology evolves faster than existing regulation, engineers developing open, disintermediated systems do not fit into financial regulations designed for systems with intermediaries. We should support legislative and regulatory initiatives that foster clarity, reduce uncertainty, and enable responsible participation across both centralized and decentralized markets. In Principled Perspectives, Alexis Sirkia discusses how Ethereum's scaling problem was never about throughput, but rather about how value moves between participants.
The rollup model was designed around the wrong assumption, leading to fragmentation rather than scaling. State channels, on the other hand, allow participants to transact peer-to-peer off-chain, with the base layer serving as the enforcement mechanism. The industry's response to bridge exploits has been to build better bridges, but the vulnerability lies in the premise that value needs to pass through an intermediary. The CFTC is preparing to approve the first U.S.
framework for perpetual futures, which will require infrastructure that can settle cross-chain in real-time without passing through custodial chokepoints. Rollups, by design, are not candidates for this job. The market is starting to price in that the real constraint was always trust at the intermediary layer, and infrastructure that eliminates this layer entirely is where capital and builders will migrate.