Congress Divided on DeFi, Trump’s Silence Raises Crypto Questions[embed]https://www.youtube.com/watch?v=Ycs2SRuktCg[/embed][embed]https://www.youtube.com/watch?v=Vhc_nE-qQJk[/embed]

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<p class="is-style-lead">As differences arise between Democrats and Republicans regarding DeFi, what implications does Trump’s silence hold for the crypto community? Could it indicate a lack of interest or a calculated neutrality?</p>

<h2 class="wp-block-heading" id="de-fi-gets-the-spotlight">DeFi Takes Center Stage</h2>
<p>On September 10, the inaugural Congressional hearing on decentralized finance occurred, signaling a pivotal moment in the advancement of this technology.</p>
<p>Entitled “Decoding DeFi: Breaking Down the Future of Decentralized Finance,” the session, led by Congressman French Hill, lasted for nearly two and a half hours.</p>
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<p>U.S. lawmakers convened to deliberate on both the advantages and risks that DeFi could bring to the financial landscape.</p>
<p>The hearing revealed a distinct split among lawmakers. Republicans, led by Hill, expressed enthusiasm about DeFi’s potential to eliminate intermediaries and revolutionize financial markets.</p>
<p>Hill remarked, “by replacing intermediaries with autonomous, self-executing code, decentralized finance can alter the current structure and governance of financial markets and transactions.”</p>
<p>In contrast, Democratic lawmakers raised alarms about the potential misuse of DeFi, particularly concerning its facilitation of criminal activities. While Republicans advocated for more lenient regulations, Democrats pushed for stronger oversight, citing the risks of illicit usage.</p>
<p>What implications does this hearing hold for the future of DeFi and the broader crypto ecosystem, especially with the U.S. presidential elections approaching?</p>
<h2 class="wp-block-heading" id="a-clash-of-perspectives-on-de-fi">Diverging Views on DeFi</h2>
<p>The hearing evolved into a battleground of perspectives, emphasizing stark contrasts in lawmakers’ views on DeFi. Subcommittee chair Hill initiated the conversation by highlighting the opportunities that DeFi and tokenization could present for finance.</p>
<p>However, not all representatives shared his optimism. Congressman Brad Sherman, a Democrat from California, adopted a more skeptical stance, voicing concerns that DeFi could merely serve as a means for tax evasion, particularly among the ultra-wealthy.</p>
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<p>“What we have here is an effort to liberate billionaires from income taxation… Each time a billionaire successfully cheats on his taxes, a member of the Freedom Caucus earns his wings.”</p>
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<p>In response to Sherman’s points, Peter Van Valkenburgh, research director at Coin Center, offered a counterargument. He acknowledged the reality of tax evasion as a crime but emphasized that DeFi’s transparent, decentralized ledger complicates the efforts of bad actors to conceal their activities.</p>
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<p>“Tax evasion is a crime. It should be strictly enforced. However, I don’t believe that the existence of tax evasion justifies a fully surveilled and controlled financial system.”</p>
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<p>Van Valkenburgh further spotlighted the confusion surrounding tax guidance from the IRS. He argued that many crypto users wish to comply with tax regulations but aren’t provided with clear direction on how to do so.</p>
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<p>“A challenging aspect in the cryptocurrency domain has been obtaining clear tax guidance from the IRS on how Americans can report capital gains, or potentially their wages, earned through these networks.”</p>
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<p>He added that it’s more likely for criminals to utilize traditional financial systems to obscure illicit funds than transparent blockchain networks.</p>
<p>Conversely, Mark Hays, Senior Policy Analyst at Americans for Financial Reform, depicted DeFi in a less favorable light, characterizing the space as volatile and filled with scams that lead to significant investor losses.</p>
<p>Hays insisted that DeFi shouldn't receive a free pass and underscored the necessity for existing securities laws to extend to decentralized systems for investor protection.</p>
<p>In contrast, Amanda Tuminelli, chief legal officer at DeFi Education Fund, highlighted DeFi’s capacity to democratize finance. She argued that traditional financial systems depend on intermediaries that often act as gatekeepers.</p>
<p>“Major banks can and do deny access to the system for discriminatory reasons, or even without justification,” she noted, contrasting this with DeFi’s open-access approach. She claimed that anyone with an internet connection can engage with DeFi, describing it as “the essence of financial inclusion.”</p>
<p>Tuminelli contended that equating DeFi with traditional finance isn't appropriate, given the fundamentally different underlying structures. She proposed that regulations should consider the self-custodial characteristics and transaction anonymity of decentralized systems.</p>
<h2 class="wp-block-heading" id="crypto-left-out-of-the-presidential-debate-spotlight">Crypto Ignored in Presidential Debate</h2>
<p>On September 10, Vice President Kamala Harris and former President Donald Trump squared off in the second presidential debate of the 2024 election. Despite Trump's established support for crypto, there was no mention of crypto at all during the discussion.</p>
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<p>Instead, the debate concentrated on traditional economic issues, with no allusion to cryptocurrency, blockchain, or any broader financial technology concepts.</p>
<p>Harris's strong debate performance seemed to unsettle Trump, especially as he struggled to articulate his stance on contentious subjects like abortion.</p>
<p>This dynamic appeared to affect the crypto market, with Bitcoin (BTC) dropping from approximately $58,000 to $56,000 following the debate. As of September 11, it has seen a slight rebound, hovering around $56,800.</p>
<p>Meanwhile, Ethereum (ETH), the second-largest cryptocurrency by market cap, also experienced a modest dip of roughly 0.5%, trading at about $2,340 during this period.</p>
<p>In an unexpected turn for Trump, who has historically presented himself as a proponent of deregulated financial markets, his odds of winning, <a href="https://polymarket.com/event/presidential-election-winner-2024?tid=1726069717603" target="_blank">according</a> to the betting platform Polymarket, dropped from 52% before the debate to 50% as of now.</p>
<p>Additionally, a CNN flash poll <a href="https://www.cnn.com/2024/09/11/politics/election-poll-trump-harris-debate/index.html" target="_blank">indicated</a> Harris's supremacy, with 63% of viewers stating she outperformed Trump. However, the majority of respondents expressed that the debate would not sway their voting decisions in November.</p>
<p>As the election campaign progresses and calls for a third debate intensify, it remains unclear whether cryptocurrency will finally be in the spotlight.</p>
<h2 class="wp-block-heading" id="what-to-expect-next">What’s Next?</h2>
<p>Throughout Biden's administration, Democrats have maintained a skeptical stance on crypto, emphasizing the associated risks and calling for stricter regulations. Even so, Vice President Kamala Harris has kept mum on the matter, leaving her position ambiguous.</p>
<p>Meanwhile, Trump, who once took a strong anti-crypto position, has modified his tone to appeal to pro-crypto voters. Recently, he has demonstrated a greater openness to blockchain and crypto on multiple occasions.</p>
<p>However, similar to Harris, he has refrained from addressing the topic when it matters most, such as during the Trump vs. Musk Twitter Space dialogue in August and again during the second presidential debate, where crypto was conspicuously absent.</p>
<p>The future trajectory of crypto and DeFi in the U.S. remains uncertain. With the forthcoming elections, the manner in which the next administration approaches this expanding sector could significantly impact both innovation and regulation in the financial realm.</p>

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