Defi leaders push back as the DAO, governance and security debate rages on
US lawmakers have postponed the planned passage of the Digital Asset Market Transparency Act (CLARITY), delaying progress on a bill that would regulate how cryptocurrencies and decentralized finance (DeFi) platforms are regulated, and prompting renewed backlash from DeFi leaders who say the bill still fails to adequately protect developers.
Industry groups and crypto venture firms have warned that the proposed reforms could impose unfavorable requirements on decentralized systems. According to representatives of Paradigm and Variant, there is an unresolved ambiguity in whether the current draft will require DeFi developers and infrastructure providers to implement Know Your Customer (KYC), register with financial regulators or comply with rules designed for centralized platforms.
The delay follows criticism from the crypto sector, including a public outcry from Coinbase CEO Brian Armstrong, which prompted Senate Banking Committee Chairman Tim Scott to announce a “short cut.”
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Vitalik Buterin calls for a new DAO design for onchain disputes and governance
Ethereum founder Vitalik Buterin asks them to rethink how decentralized autonomous organizations (DAOs) are designed.
Buterin said that this model is inefficient, vulnerable and unable to improve on traditional management systems. He added that DAOs should be purpose-built to support core infrastructure such as oracles, on-chain dispute resolution, insurance decisions and long-term project management.
He also explained how different governance problems require different structures by identifying issues that benefit from decisive leadership and broad consensus.
Buterin warned that low participation, whale dominance and weak decision-making are the main challenges, and said privacy tools, limited AI assistance and better governance design are critical for DAOs.
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DeFi protocol Pendle renews its governance token citing low adoption
DeFi protocol Pendle is improving its governance model by eliminating the VEPENDLE token and introducing a new liquid staking and governance token, sPENDLE.
The group said vePENDLE's long lock-up time, inability to transfer, and complex voting mechanics limited participation, even though the protocol has a total value locked (TVL) of nearly $3.5 billion.
The new token aims to reduce barriers by allowing withdrawals after a 14-day settlement period, enabling integrations with other DeFi platforms and simplifying management involvement.
Pendle is optimizing voting requirements and plans to use up to 80% of protocol revenue for management rewards and token purchases.
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New SEC filings push for self-regulation and DeFi regulation
Two new submissions to the US Securities and Exchange Commission's crypto task force are increasing pressure on regulators to clarify how self-regulation rights and the DeFi movement should be treated under upcoming market structure rules.
Citing a Louisiana law that protects retail consumer discretion, he warned that overly broad exemptions in the federal proposals could weaken investor protections and increase fraud risks.
Another submission from the Blockchain Association argued that companies trading tokenized shares or defensible assets from their own accounts should not automatically be classified as regulated traders.
The filing comes as negotiations continue in Congress, with policymakers and industry experts pushing for consensus.
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Aave refocuses on DeFi, hands over lens management to the Mask network
Lend Protocol Aave has moved the role to technical advisory support as it refocuses on DeFi, leading the Lens protocol to the Mask network.
Under the transition, Musk Network will lead consumer-oriented development and production for Lens-based social applications, while the protocol's core infrastructure will remain license-free and open source.
Vitalik Buterin, founder of Ethereum, welcomed the move, commenting that decentralized social networks built on shared databases are necessary to encourage competition and improve online discourse.
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Overview of the DeFi market
Most of the 100 largest cryptocurrencies by market capitalization ended the week in the red, according to data from Cointelegraph Markets Pro and TradingView.
The WHITEWHALE token fell more than 57% during the week, marking its biggest decline in the past seven days. It was followed by a token called Merlin Chain (MERL), which dropped 48% last week.
Thanks for reading this week's roundup of the most impactful DeFi developments. Join us next Friday for more stories, insights and lessons about this dynamic and evolving space.
