Finance Redefined: DeFi Compliance and Challenging SEC Rules in 2024

Welcome to Finance Redefined, a newsletter that provides you with the latest updates in decentralized finance (DeFi). In a recent interview with , Ripple’s president predicted that 2024 could be the year when DeFi regulations come into play. At the same time, the United States Securities and Exchange Commission (SEC) has introduced new definitions for “dealer” and “government securities dealer,” targeting liquidity providers in DeFi. Experts believe that these new rules will be challenged in court by stakeholders.

The top 100 DeFi tokens had a positive week, following the broader market gains. The total value locked (TVL) in DeFi protocols has also exceeded $63 billion, indicating the growing popularity and acceptance of DeFi.

Ripple’s president, Monica Long, believes that compliance in DeFi will be the industry’s most significant breakthrough in 2024. She stated in the interview that real-world utility at scale requires compliance, usability, and integration with existing systems, replacing the previous hype cycles driven by initial coin offerings and nonfungible tokens.

On February 6, the SEC implemented new rules that redefine “dealer” and “government securities dealer.” These rules require more participants in the crypto market to register, join a self-regulatory organization, and comply with federal securities laws. These rules have faced criticism from the crypto community, DeFi ecosystem, and pro-crypto politicians. The lack of clarity on the definition of crypto securities has been a key point of contention.

Ethereum-based liquid restaking protocol EigenLayer experienced a significant surge in total value locked (TVL) after temporarily removing its staking cap. Within eight hours of lifting the cap, EigenLayer’s TVL increased by $1 billion. This move is seen as paving the way for a future where all staking caps are permanently eliminated.

In Australia, a federal court ruling has brought attention to the distinction between different types of crypto-yield products in DeFi. The court ruled that products promising a managed yield require a financial services license, while “pass-through” DeFi products may not. This ruling came as a result of the Block Earner case, where penalties were imposed on the offering of its “Earner” product without obtaining an Australian Financial Services License.

In terms of market performance, the top 100 DeFi tokens have shown positive signs, with most experiencing gains in the past week. The TVL in DeFi protocols has reached a new milestone of $63.9 billion, reflecting the growing interest and investment in DeFi.

Thank you for reading this week’s DeFi developments. Join us next Friday for more updates and insights on this rapidly evolving field.