A former high-tech corporate lawyer has advocated for sector-specific regulations for decentralized finance that leverage the technology’s strengths while addressing its weaknesses.
The Importance of Collaboration
Ran Hammer, a blockchain and crypto-focused lawyer, is advocating for sector-specific laws for decentralized finance (defi) that consider the strengths and weaknesses of the underlying technology. According to Hammer, the goal is not to impose stringent regulations but to achieve efficiency and fairness in trading platforms.
However, unlike in centralized finance (cefi), these goals can be “achieved on a technological level and built into various protocols.” Hammer, the business, marketing and communities lead at Orbs, says collaboration between developers and regulators is crucial for creating safe harbors for protocols. While this approach could work, Hammer believes its success hinges on the level of collaboration between the two parties.
“The challenge is really that implementing this type of system will involve a long process of education and collaboration and the political will has not been there in the past. I think that the more DeFi builds and establishes itself as a real economic force, the more likely this will happen,” Hammer told Bitcoin.com News.
The Orbs marketing executive however acknowledges that the rising number of incidents involving bad actors using defi platforms to move and cash out stolen digital assets creates conditions that justify regulators’ concerns. Some crypto crime reports in 2024 showed that security incidents involving defi platforms had consistently outnumbered those of centralized exchanges.
While major crypto exchange heists in 2024 (DMM Crypto and Warzirx) suggest that bad actors are improving their tactics against security measures deployed by these exchanges, reports of state-sponsored hackers using defi platforms to swap or move stolen funds continue to fuel regulators’ concerns.
The Trump Effect
Hammer asserts that the openness of decentralized finance makes it difficult for platforms to implement compliance measures like those used by traditional financial intermediaries. However, regulators can still address this challenge, particularly with fully open protocols, by focusing on fiat off-ramps or intermediaries that bridge decentralized finance and traditional finance.
In the absence of regulation, the marketing executuve emphasized that defi platforms must “evaluate and mitigate their regulatory risks while pushing innovation forward.”
Meanwhile, Hammer said he shares the optimism of many crypto enthusiasts that the Trump administration will pursue policies beneficial to the digital asset industry. However, he cautioned that the administration’s actions will largely depend on a shift in regulatory agencies’ attitudes.
“Bureaucracy is always complicated, especially when innovation and uncertainty are involved, but it definitely seems like the Trump administration is trying to put the right people and policies in place. Even if the effects aren’t clear in 2025, I expect we will see positive things down the road,” he said.
