CFTC Crypto Meeting Becomes a Battleground: DeFi vs. TradFi on Regulation

Meeting Background

The U.S. Commodity Futures Trading Commission (CFTC) held the first meeting of its Innovation Advisory Committee, bringing together voices from crypto-native projects, traditional financial institutions, infrastructure providers, and regulators. The meeting focused on digital asset market structure, investor protection, and regulatory pathways, with the divide between DeFi and traditional finance (TradFi) running throughout.

DeFi Founders' Accusations

Uniswap founder Hayden Adams publicly stated that he, his company, and multiple employees had been "debanked"; after a four-year investigation, the SEC issued a Wells notice, alongside a CFTC investigation, overlapping state-level regulation, and class-action lawsuits. Ripple revealed that during its four-year fight against the SEC, external legal fees reached $150 million, and 80% of Ripple's hiring occurred overseas during that period. Multiple speakers said regulatory uncertainty has overwhelmed many startups, driving people to leave the U.S. or shut down projects, with only a few with the resources and willingness remaining.

CFTC's Stance and Legislative Priority

CFTC Chairman Celig stressed that the industry needs clear rules; if the clarification process remains blocked, the CFTC will exercise its existing authority to establish a regime for crypto asset markets, creating a future-oriented digital asset market structure that cannot be overturned by "crypto opponents." However, legislation remains the current priority: the CFTC will not issue new rules until the legislative path becomes clear. Market attention is focused on the upcoming Senate vote, with about 24 days left before the critical moment.

TradFi's Concerns and On-Site Confrontation

Traditional finance representative and CME executive Duffy questioned whether certain crypto products comply with core anti-manipulation principles, saying these products are "not what our industry should look like." Attendees countered that the products in question are not listed in the United States, calling Duffy's characterization "fake news." Someone then asked whether CME itself had a history of market manipulation, and tensions escalated. Traditional institutions also called out the impact of decentralized platforms on markets, worrying that U.S. users could bypass restrictions via VPNs to access offshore markets. Kraken CEO argued that the existing regulatory environment does not need to be torn down and rebuilt, but that new technology gives ordinary individuals tools once held only by large institutions, exerting "deflationary" pressure on incumbents.

Privacy and Code Security: Another Main Theme

The meeting also discussed privacy and software security: projects such as Zcash demonstrated the use of AI to discover vulnerabilities and formal verification methods, which use mathematics to verify code correctness. Participants believed the Ethereum ecosystem is entering a "golden age of software." Meanwhile, privacy concerns are rising in American society; for example, the city of San Diego sparked controversy over an automatic license plate reader (ALPR) contract, with residents dramatically expressing wariness about expanded surveillance. This could make privacy-preserving technology an important dimension in crypto policy.

Pre-IPO Perpetual Contracts: Potential Breakthrough in New Markets

A Multicoin representative proposed considering "pre-IPO perpetual contracts" that would give ordinary investors compliant, regulated exposure to private company prices without requiring the companies to go public. This direction is seen as potentially upending traditional IPOs and Wall Street's wealth-creation logic, and is viewed as one of the changes traditional financial institutions least want to see.

Market Reaction and Outlook

The CFTC meeting and legislative progress drove some price volatility in crypto assets, but market sustainability remains to be seen. In the coming weeks, the Senate vote on the Clarity Act and whether the CFTC/SEC introduce alternative rules will be key to determining the near-term direction of the U.S. crypto market.