US crypto policy pause fuels fresh debate over DeFi and governance: Finance Redefined

US lawmakers just hit pause on the CLARITY Act — and DeFi leaders are breathing fire. The bill's delay after pushback from Coinbase CEO Brian Armstrong and others hasn't calmed nerves. Industry heavyweights like Paradigm and Variant are warning that proposed amendments could still force DeFi devs into impossible KYC compliance and centralized platform rules. Senate Banking Chair Tim Scott called a 'brief pause,' but the fight's just getting started.

Vitalik Buterin dropped a bombshell: most DAOs are broken. He says they've devolved into 'token-voting treasuries' that are inefficient, vulnerable, and no better than traditional governance. Buterin's calling for a complete redesign — DAOs should be built for specific purposes like onchain dispute resolution, oracle management, and long-term project stewardship. He warned about whale dominance, low participation, and decision fatigue, saying privacy tools and better governance design are non-negotiable.

Pendle's dumping its governance token. The DeFi protocol with nearly $3.5B TVL is phasing out vePENDLE because its long lock-ups and complex voting mechanics killed participation. Enter sPENDLE — a new liquid staking token with 14-day withdrawal periods and simplified governance. They're planning to use up to 80% of protocol revenue for governance rewards and buybacks. This is a major admission: even successful protocols struggle with tokenomics.

New SEC filings are turning up the heat on self-custody and DeFi regulation. One submission references Louisiana law protecting retail users' right to self-custody, warning that weak federal exemptions could increase fraud risks. Another from the Blockchain Association argues companies trading tokenized equities from their own accounts shouldn't automatically be classified as regulated dealers. The regulatory pressure cooker is building as Congress negotiations continue.

Aave's refocusing on DeFi and handing Lens Protocol to Mask Network. The lending giant is stepping back from social media infrastructure to concentrate on its core business. Mask Network will now lead consumer-facing development for Lens-based apps, while the protocol stays open-source. Vitalik Buterin endorsed the move, saying decentralized social networks built on shared data layers are essential for better online discourse and competition.

DeFi market took a beating this week. Most top 100 cryptos ended in the red, with White Whale (WHITEWHALE) crashing 57% and Merlin Chain (MERL) dropping 48%. Total value locked in DeFi shows the sector's volatility remains extreme even as regulatory battles intensify.