Exploring Decentralized Finance: Understanding Its Promise and Challenges

WASHINGTON, September 10, 2024 -

Today, the House Committee on Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion led by Chrman French Hill AR-02, is convening a hearing titled Decoding DeFi: Breaking Down the Future of Decentralized Finance.

Watch Chrman Hill's opening remarks here.

Read the detled remarks that were delivered:

Welcome back to Capitol Hill after our recent work period. Today, we're discussing decentralized finance and its implications for the future.

Following the passage of FIT21 legislation with bipartisan support, I am pleased to convene this hearing as part of our ongoing exploration into innovative technologies like tokenization and DeFi in financial services.

As we consider how blockchn technology can reshape finance, it's crucial that we expand our understanding of both the potential costs and benefits associated with decentralized finance.

Decentralized finance DeFi envisages a financial system characterized by permissionlessness, transparency, efficiency, and is built upon blockchn networks. It rests on the core principle of empowering individuals to transact freely without fear of illegal financial surveillance or abuses by governments.

By replacing traditional intermediaries with self-executing code, DeFi has the potential to transform how financial markets and transactions are structured and governed. A world where decisions in finance no longer hinge on arbitrary actions of policymakers or central authorities is within reach.

However, this technology comes with complexity that's both cutting-edge and constantly evolving. We must understand it thoroughly before we can legislate thoughtfully or oversee regulatory bodies effectively.

At its essence, DeFi isn't just about smart contracts and decentralized protocols; it's a technology connecting people to redefine how they transact with one another on the global stage.

Today's hearing delve into fundamental aspects of DeFi. I encourage members from both sides of the sle to approach this discussion with an open mind.

Our panelists will provide insights on the technology, its mechanics and potential benefits versus risks, as well as legal and regulatory considerations.

It's important to recognize that our current regulatory frameworks were designed for a financial system anchored in centralized intermediaries. This doesn't account for the decentralized peer-to-peer ecosystem enabled by digital assets and blockchn.

In contrast to other jurisdictions like the European Union who have explicitly outlined DeFi in their digital asset legislation, enabling them to better understand its implications and develop appropriate regulations, we took an analogous approach with FIT21 legislation.

Contrary to the Biden-Harris administration's approach of utilizing rulemaking and enforcement actions that undermine DeFi, which threatens its existence and future use in the U.S., this Committee has taken a proactive stance through historic bipartisan legislation like FIT21.

Now, as Congress moves forward, it is essential for us to assess DeFi holistically while considering how we can foster an effective regulatory landscape that supports transformative technologies.

This hearing is about more than just smart contracts and decentralized protocols; it's about understanding how technology can preserve individual freedom while improving financial services for both businesses and consumers alike.

Our objective today is to take another step in our collaborative work to establish a robust regulatory framework that not only enables but also ensures safety and security when accessing and leveraging this technology.

I am grateful for the expertise of our esteemed witnesses who will share their profound knowledge with us. I look forward to an enlightening and inclusive dialogue amongst all members of this Subcommittee today.

of Remarks

This hearing serves as a platform for informed discussion on DeFi's potential, its implications, and how we can best navigate its integration into the global financial ecosystem. Together, let's embark on this journey towards smarter regulations that empower innovation while protecting consumer interests.
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