The issue is about how DeFi should be treated by regulators in the United States. Both sides say they care about market safety but they strongly disagree on how rules should be applied.
The situation began when the trading firm sent a long letter to the US securities regulator. In that letter the firm argued that DeFi platforms dealing with tokenized assets should face stricter rules. It suggested that many DeFi systems work in a similar way to traditional exchanges or brokers and should be regulated in the same manner.
This view did not sit well with the DeFi community. In response several groups and individuals from the DeFi space sent their own letter to the regulator. They pushed back against the claims and said the arguments were not accurate. According to them decentralized systems are different by design and do not always need the same structure or registration as traditional financial firms.
The DeFi groups said they agree with goals like protecting users and keeping markets fair. However they believe these goals can also be reached through smart design on blockchain systems. They explained that rules built for old systems may not fit well with open software based markets.
They also pointed out that many DeFi platforms are run by code not by companies. Because of this they argue that forcing them into old regulatory boxes could harm innovation and limit growth. In their view clear and balanced rules should recognize these differences instead of ignoring them.
The debate comes at a time when crypto policy in the United States is changing. The current leadership at the regulator has shown signs of being more open to digital assets. There have been public statements supporting the idea that software builders and DeFi developers deserve protection and clarity.
The trading firm responded by saying it supports innovation and tokenization. It stressed that strong investor protection has helped make US markets trusted around the world. From its point of view new technology should not weaken those protections.
The DeFi side was not convinced. They said the original letter included wrong descriptions and misleading points about how DeFi works. One spokesperson suggested that the firm may be acting to protect its own business. According to her decentralized finance could reduce the role of large middlemen and that creates fear for established players.
This disagreement highlights a bigger question facing the financial world. How should new open systems be treated under old rules. DeFi is growing fast and bringing new ideas to finance. At the same time regulators want to make sure users are safe.
Both sides agree that the future of finance is changing. The challenge is finding a balance that allows new tools to grow without harming users. This ongoing discussion may help shape how decentralized finance develops in the years ahead.
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