100 Reasons Why DeFi Market Must Be Protected

Key Insights:

• Over 110 crypto firms urged Congress to protect DeFi developers in new laws in the US.
• Coalition warned unclear rules could push innovation outside the US.
• Stablecoins highlighted as key to expanding the global reach of the dollar

Over 110 Web3 stakeholders, including crypto firms, investors, and advocacy groups, have asked US lawmakers to protect DeFi developers and non-custodial services in new digital asset laws.

They warned that blockchain innovation could slow if clear federal rules are not written into future market structure legislation.

Industry Calls for Stronger DeFi Developer Protections

The DeFi market came under the spotlight in Washington as more than 110 companies, investors, and advocacy groups signed a letter to Senate Banking and Agriculture Committee leaders.

The letter was led by the DeFi Education Fund and supported by Coinbase, a16z crypto, Ripple, and several blockchain councils.

The group asked lawmakers to protect developers who publish open-source code and provide non-custodial services.

Industry Groups Calls for DeFi Developer Protection | Eleanor Terrett

They warned that labeling them as financial intermediaries would place them under rules built for banks and brokers, not software creators.

This, they said, could hold back blockchain progress in the United States.

The letter noted that open-source developers had long been shielded by law and said the same principle should apply in digital assets.

It also pointed to a White House report showing a drop in the share of US open-source developers, from 25% in 2021 to 18% in 2025.

That decline, the group argued, showed that talent was leaving the country due to regulatory uncertainty.

Although the coalition welcomed some protections included in draft market structure bills, such as the right to self-custody assets, it argued that these steps were not enough.

It called for clear nationwide standards to avoid a patchwork of rules that would vary from state to state.

Stablecoins Seen as Gateway for DeFi Growth

Sandeep Nailwal, chief executive of the Polygon Foundation, also spoke on the role of stablecoins, as an extension of DeFi, in US digital finance.

He said the United States had realized that stablecoins were a fast way to expand the global use of the dollar.

The Stablecoin Advocacy Update | Source: Sandeep Nailwal

He pointed to Wyoming’s launch of a state-backed stablecoin on the Polygon network.

Nailwal said more states could follow, comparing the trend to the early days of the internet.

He argued that just as slow adoption of the internet had left many countries dependent on American companies, late entry into stablecoins could place nations at a disadvantage.

Nailwal noted that $2.76 billion in stablecoin transactions passed through Polygon every day.

Notably, he said this volume showed how stablecoins allowed US monetary policy to spread worldwide almost instantly.

For him, this trend has given the United States a clear head start in the digital currency race.

Lawmakers Advance Market Structure Debate

The push for stronger protections came as the United States moved forward on wider digital asset legislation.

It is worth noting that a major step was the signing of the Stablecoin Act by President Donald Trump.

The act set rules for the issuance of stablecoins at the federal level, aiming to give states and private issuers a clear framework.

Supporters said it could strengthen the use of Stablecoins. At the same time, many other countries are still shaping their digital asset rules.

The lack of global consistency has left uncertainty for developers and investors who operate across markets.

In contrast, the United States was moving toward a national framework, which the industry hoped would give greater clarity.

Industry groups said that well-structured laws could encourage more institutional investors to enter the market.

They also said that protecting developers and non-custodial services would keep innovation in the United States rather than pushing it abroad.

The letter sent to Congress marked one of the strongest joint efforts by the DeFi sector to shape national policy.

Lawmakers were expected to resume negotiations in the weeks ahead, with developer protections expected to remain a central issue in the debate.

Source: https://www.thecoinrepublic.com/2025/08/29/100-reasons-why-defi-market-must-be-protected/