As Democrats and Republicans argue over DeFi, what message does Trump’s silence send to the crypto community? Is it a sign of disinterest or strategic neutrality?
DeFi gets the spotlight
On September 10, the first Congressional hearing was held on decentralized finance took place, marking an important moment in the evolution of this technology.
The hearing, titled “Decoding DeFi: Analyzing the Future of Decentralized Finance,” was led by Congressman French Hill and lasted nearly two and a half hours.
US lawmakers met to discuss the potential benefits and risks that DeFi could introduce to the financial system.
The hearing exposed a clear divide among lawmakers. Republicans, led by Hill, were optimistic about DeFi’s ability to eliminate intermediaries and transform financial markets.
As Hill stated, “By replacing intermediaries with autonomous, self-executing code, decentralized finance can change the way financial markets and transactions are currently structured and governed.”
Meanwhile, Democratic lawmakers raised concerns, focusing on the potential misuse of DeFi, particularly its role in facilitating criminal activity. While Republicans called for looser regulation, Democrats argued for stricter oversight, citing the risks of illicit use.
What does this hearing mean for the future of DeFi and the cryptocurrency market in general, especially as the US presidential election approaches?
A clash of perspectives on DeFi
The hearing itself became a battleground of opinions, with stark contrasts in how lawmakers viewed DeFi. Subcommittee Chair Hill kicked off the debate by focusing on the opportunities DeFi and tokenization could offer to finance.
However, not everyone saw it that way. California Democratic Congressman Brad Sherman took a more critical stance, expressing concern that DeFi could be nothing more than a tool for tax evasion, especially for the ultra-rich.
What we have here is an effort to free billionaires from income taxes… Every time a billionaire manages to evade his taxes, a member of the Freedom Caucus earns his wings.
Responding to Sherman’s concerns, Peter Van Valkenburgh, director of research at Coin Center, offered a counterargument. He acknowledged that tax evasion is a crime, but noted that DeFi’s transparent and decentralized ledger makes it difficult for bad actors to hide their activities.
Tax evasion is a crime that must be strictly controlled. However, I do not believe that tax evasion and its existence justify a 100% monitored and controlled financial system.
Van Valkenburgh also pointed to the confusion surrounding IRS tax guidelines. He argued that many cryptocurrency users want to comply with tax laws but lack clear instructions on how to do so.
One difficult area in the cryptocurrency space has been getting clear tax guidance from the IRS on how Americans can pay their taxes when they make capital gains, or perhaps their wages, on these networks.
He added that criminals are more likely to use traditional financial systems to hide illicit funds rather than transparent blockchain networks.
On the other hand, Mark Hays, senior policy analyst at Americans for Financial Reform, painted DeFi in a less favorable light. He described the space as volatile and riddled with scams, where investors often face devastating losses.
Hays stressed that DeFi should not be given a free pass and that existing securities laws should apply to decentralized systems to protect investors.
Meanwhile, Amanda Tuminelli, legal director of the DeFi Education Fund, took a different approach. She highlighted DeFi’s potential to democratize finance. According to Tuminelli, traditional financial systems rely on intermediaries, who often act as gatekeepers.
“Big banks can deny access to the system for discriminatory reasons or no reason at all,” he said, contrasting this with the open-access nature of DeFi. He suggested that anyone with an internet connection can use DeFi, calling it “the epitome of financial inclusion.”
Tuminelli argued that treating DeFi like traditional finance is not the right approach, as the underlying structures are fundamentally different. He suggested that regulations should take into account the self-custodial nature and transaction anonymity of decentralized systems.
Cryptocurrencies were left out of the spotlight of the presidential debate
Vice President Kamala Harris and former president Donald Trump On September 10, they faced off in the second presidential debate of the 2024 election. Despite Trump’s well-known pro-cryptocurrency stance, the debate completely avoided any mention of cryptocurrencies.
Instead, the focus was on traditional economic issues, with no reference to cryptocurrencies. Blockchainor broader fintech topics.
Harris’ strong performance during the debate appeared to unsettle Trump, particularly because she struggled to defend her position on contentious issues such as abortion.
All of this seemed to affect the cryptocurrency market, as Bitcoin (Bitcoin) fell from about $58,000 to $56,000 after the debate. As of September 11, it had recovered slightly and was around $56,800.
Ethereal (Ethnicity), the second largest cryptocurrency by market capitalizationalso experienced a small drop of around 0.5%, trading around $2,340 during the same period.
In a surprise to Trump, who has long positioned himself as a champion of deregulated financial markets, his chances of winning, according On the online betting platform Polymarket, market share fell from 52% before the debate to 50% at the time of writing.
Meanwhile, a quick CNN poll reflected Harris’s lead, with 63% of viewers saying she outperformed Trump, was a strong showing. However, most respondents said the debate would not influence their vote in November.
As the campaign continues and demand for a third debate grows, it remains to be seen whether cryptocurrencies will ultimately take centre stage.
What to expect next?
Throughout the Biden administration, Democrats have consistently been skeptical of cryptocurrencies, highlighting the risks and pushing for stricter regulations. Amid this, Vice President Kamala Harris has remained silent on the issue, making her stance unclear.
Meanwhile, Trump, who in the past has been staunchly opposed to cryptocurrencies, has changed his tune in an effort to appeal to pro-crypto voters. In recent months, Trump has shown more openness towards blockchain and cryptocurrencies on several occasions.
However, like Harris, he has remained silent when it matters most, such as during the Twitter space between Trump and Musk. conversation in August and again during the second presidential debate, where cryptocurrencies were notably absent.
The future of cryptocurrencies and decentralized finance in the United States remains uncertain. With elections looming, how the next administration handles this growing sector could have a lasting impact on both innovation and regulation in the financial space.
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