The DeFi Debrief

Week of June 1, 2025: DEF's DAO Submission to the SEC; Market Structure Legislation; UK Crypto Regulatory Framework; New DEF Blog

DEF’s Latest Submission to SEC’s Crypto Task Force: Safeguarding the Future of DAOs

On May 27, 2025, DeFi Education Fund (DEF) and Uniswap Foundation (UF) submitted a proposal to the SEC Crypto Task Force on the treatment of Decentralized Autonomous Organizations (DAOs) under the securities laws. Our submission is in response to Commissioner Hester Peirce’s February 21, 2025, request for comments, “There Must Be Some Way Out Of Here,” in which she solicits comments on a proposed safe harbor exempting certain decentralized projects and tokens from securities registration. DEF previously submitted Guiding Principles for a Token Safe Harbor to the Task Force in April of 2025.

DEF and UF present two main theses for consideration: (1) dispersion of control over the governance of a network is the most workable framework for determining if a network is sufficiently decentralized for purposes of the proposed safe harbor from registration, or under the test for an “investment contract” security under Howey, and (2) there are no material information asymmetries in a sufficiently decentralized network, which reinforces that federal securities laws do not apply to network tokens or transactions in which a network token is the object. DEF and UF also argue that DAOs with truly decentralized governance should not be treated as securities issuers, as they lack traditional centralized control and the accompanying managerial efforts.

We recommend three principles that the Commission should adopt to better account for the realities of DAOs and decentralized governance:

• The Commission should treat DAOs with decentralized control over governance of the network as nothing more than disparate and dispersed groups of people, unless facts are developed that indicate otherwise.

• The Commission should recognize that DAOs with decentralized control over the governance of the network are not an identifiable and coordinated group of “others” undertaking efforts for the purposes of the “efforts of others” prong of a Howey analysis.

• The Commission should recognize that blockchain records are a uniquely transparent and immutable resource that eliminates informational asymmetries.

We are grateful to our partners at the Uniswap Foundation for collaborating with us on this submission. DEF remains focused on protecting decentralized governance in all of its forms, ultimately to ensure decentralized development can flourish in the United States.

House Committee Leadership Formally Introduces Market Structure Legislation

On May 29, 2025, House Financial Services (HFSC) and House Agriculture Committee Leadership, led by HFSC Chairman French Hill (R-AR) and with several co-sponsors, formally introduced the Digital Asset Market Clarity Act, a bipartisan effort to support innovation in digital assets by establishing a regulatory market structure in the United States.

The Committees provided helpful summary resources: a one-page summary of the legislation (here) and a section-by-section analysis (here).

The formal introduction of the legislation to the 119th Congress follows the introduction of a previous discussion draft in early May of 2025. The DEF team published background and analysis on that prior draft legislation and its implications for DeFi.

HFSC has announced a hearing to debate digital asset market structure to be held on June 4th: “American Innovation and the Future of Digital Assets: From Blueprint to a Functional Framework.” HFSC also noticed a Committee Markup for June 10th. The DEF team will follow both of these milestones closely.

There has been a massive amount of work behind-the-scenes to provide digital asset markets with much-needed regulatory clarity, and we applaud the efforts of the Committees and their staff for leading this important work.

The DEF team is focused on ensuring DeFi technology and market participants are accurately described, properly classified, and appropriately represented in market structure legislation. Stay tuned for updates and analyses from our team.

UK Crypto Regulatory Framework Comments on DeFi Exclusion

On May 23rd, 2025, the UK Cryptoasset Business Council (UKCBC) submitted a letter offering feedback on the draft regulatory framework for cryptoassets in the UK issued by HM Treasury and specifically addressed the proposed DeFi exclusion.

As a reminder, on April 29, 2025, HM Treasury released a draft policy paper of forthcoming statutory provisions to create new regulated activities for cryptoassets. The draft statutory instruments order does not include special provisions for DeFi models, but instead states: “Where specified activities are being undertaken on a truly decentralised basis, i.e. where there is no person that could be seen to be undertaking the activity by way of business, then requirements to seek authorisation will not be applicable. The FCA will determine in any given case whether there is a sufficiently controlling party or parties that ought to be subject to the requirement to be authorised.”

While UKCBC’s letter applauds HM Treasury’s decision to distinguish between centralized intermediaries and DeFi protocols in upcoming regulations, and expressed support for HM Treasury’s policy decision to exclude DeFi, UKCBC notes that the current draft “creates ambiguity regarding whether technical infrastructure and software developers are in scope.” UKCBC explains that the ambiguity could have a chilling effect on DeFi innovation. They also express that further guidance is needed on concepts of control and decentralization.

The regulatory framework for cryptoassets continues to develop in the UK. On May 28, 2025, the UK’s Financial Conduct Authority (FCA) called for further public comment on new stablecoin and crypto custody rules.

DEF applauds HM Treasury for recognizing the absence of intermediaries in DeFi and the concept of a “sufficiently controlling party.” We agree that additional guidance for DeFi market participants is always useful, and we appreciate the UK Cryptoasset Business Council’s thoughtful letter.

DEF Blog Unpacks the Realities of ByBit Hack

On May 29, 2025, DEFs research director Laz Pieper published a blog post unpacking how some U.S. Senators are misframing the ByBit hack. The post is in response to Senators Elizabeth Warren and Jack Reed’s letter to Secretary of Treasury Scott Bessent and Attorney General Pamela Bondi about North Korea’s theft and money laundering efforts. Rather than properly framing the incident as a social engineering exploit, the letter misrepresents this attack as a flaw internal to ByBit’s cybersecurity and as an overall critique of crypto.

DEF urges policymakers to engage with the realities of technology and cybersecurity issues – especially in situations related to national security and illicit finance – and to ensure blockchain technologies remain a bipartisan issue.

To read the full blog post, click here.