DeFi draws backlash after anti-crypto group rolls out major ad campaign

Crypto reporter Eleanor Terrett noted that the newly established Investors For Transparency is airing prime-time ads on Fox News, encouraging viewers to challenge the DeFi-related provisions in the pending crypto legislation, only a week before the Senate committee vote.

Terrett explained that DeFi protocols have been among the most debated aspects of the CLARITY Act, dividing lawmakers, traditional institutions, and crypto advocates alike.  

The campaign’s messaging equates the decentralized finance sector with regulatory “threats” to financial stability and suggests that excluding DeFi will support broader innovation.

The online community is wondering who is running the advocacy group

The CryptoAmerica host stated that it’s not yet clear what the bill dictates on DeFi protocols, but the Senate Banking Committee’s upcoming release should clarify matters before Thursday’s markup.

In response to her X post, several platform users raised questions about the leadership and backers of the advocacy group, Investors For Transparency. Others even speculated that the group intended to tank DeFi, and their actions were relatively suspicious.

For instance, Uniswap Labs CEO Hayden Adams slammed the group, saying it’s both “ironic and unsurprising” that Investors For Transparency is attacking DeFi while keeping its backers anonymous.

Another commenter contended that the CLARITY Act specifically shields DeFi from traditional broker rules, as these systems are decentralized and run entirely by code. He added that the group’s ads claim DeFi is a risky investment.

Still, the GENIUS Act already ensures stablecoin firms can’t disguise interest as “rewards,” so fears of losing deposits are overblown or unnecessary. He even warned that if regulators require DeFi to follow traditional banking rules, it could seriously harm the $120 billion decentralized lending market.

The platform w3.io even wrote, “This debate will define whether compliance is embedded into workflows or pushed onto developers. That line determines whether DeFi evolves into infrastructure or remains legally fragile.”

Democrats proposed new changes to the DeFi protocols in the CLARITY Act

Earlier, Alex Thorn, Galaxy Research’s Head of Research, stated that there was a clear separation in the January 6 bipartisan meeting between Republicans calling for a quick vote on the bill and Democrats seeking to introduce new rules that could alter the bill’s impact on token issuance and software.

Thorn’s review of the Wednesday meetings highlighted the uncertainty surrounding whether the parties could bridge major gaps to develop a framework that could pass both chambers, with the primary battle centered on the handling of decentralized finance.

Democrats have been calling for several strict requirements for extending traditional financial controls to DeFi, Thorn said. They include the requirement for developers to carry out “front-end sanctions compliance” checks, and for the Treasury to have broader “special measures” powers. 

Democrats also demand rules on “non-decentralized” DeFi, or projects that purport decentralization but still have some administrative control or centralized hosting. Democrats also pushed for new regulations on crypto ATMs and want the Federal Trade Commission (FTC) to assume greater responsibility for protecting consumers.

They also suggested tweaks to the regulatory process that would help proactively notify the Securities and Exchange Commission (SEC) that they aren’t securities, rather than waiting for enforcement. Tim Scott, the chairman of the Senate Banking Committee, is convinced, however, that the bill will soon move forward and produce concrete benefits for Americans.

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