The United States Congress has hit the brakes on a key piece of cryptocurrency legislation, postponing a planned markup of the Digital Asset Market Clarity Act (CLARITY). The bill, intended to define regulatory frameworks for cryptocurrencies and decentralized finance (DeFi) platforms, is now in a state of limbo following a "brief pause" announced by Senate Banking Committee Chair Tim Scott.
The delay comes amid mounting criticism from the crypto industry, including public opposition from Coinbase CEO Brian Armstrong. Industry leaders, particularly from the DeFi sector, argue that the current draft of the bill fails to adequately protect developers and imposes requirements unsuitable for decentralized systems. Representatives from venture firms Paradigm and Variant highlighted unresolved ambiguities, such as whether DeFi developers could be forced to implement Know Your Customer (KYC) protocols, register with financial regulators, or comply with rules designed for centralized entities.
In parallel, Ethereum co-founder Vitalik Buterin called for a fundamental redesign of Decentralized Autonomous Organizations (DAOs), criticizing the prevalent token-voting model as inefficient and vulnerable. He advocated for purpose-built DAOs to handle core infrastructure like oracles and onchain dispute resolution.
Separately, the DeFi protocol Pendle announced a major governance overhaul, phasing out its vePENDLE token in favor of a new liquid staking and governance token, sPENDLE. The move aims to address low participation driven by vePENDLE's long lock-up periods and complex mechanics, despite the protocol boasting nearly $3.5 billion in Total Value Locked (TVL).
Regulatory pressure continues as new submissions to the U.S. Securities and Exchange Commission's (SEC) crypto task force push for clarity on self-custody rights and DeFi regulation. One filing warned that broad exemptions could weaken investor protections, while another from the Blockchain Association argued against automatically classifying companies trading tokenized assets as regulated dealers.
In other DeFi news, the lending protocol Aave refocused its efforts on core DeFi, handing stewardship of its social media project, Lens Protocol, to Mask Network. The transition was welcomed by Vitalik Buterin, who emphasized the importance of decentralized social networks built on shared data layers.
The broader DeFi market saw a downturn, with most of the top 100 cryptocurrencies ending the week in the red. The White Whale (WHITEWHALE) token led losses with a drop of over 57%, followed by Merlin Chain (MERL), which fell 48%.
