Decentralized Finance Depth Insights: System Reconstruction and Value Reshaping Under the New SEC Policy

1. Introduction: Key Turning Point in Regulatory Landscape

Decentralized Finance (DeFi) has rapidly developed since 2018 and has become one of the core pillars of the global crypto asset system. Through open, permissionless financial protocols, DeFi provides a rich array of financial functions, including asset trading, lending, derivatives, stablecoins, and asset management. Especially since the "DeFi Summer" of 2020, the total value locked (TVL) in DeFi protocols has once exceeded $180 billion, reflecting the scalability and market recognition of this field.

However, the rapid expansion of DeFi is also accompanied by issues such as regulatory ambiguity, systemic risks, and regulatory vacuum. Against this backdrop, the U.S. Securities and Exchange Commission (SEC) has adopted a stricter regulatory strategy towards the overall cryptocurrency industry. Between 2022 and 2024, several well-known projects have been subject to investigations and enforcement by the SEC or CFTC.

This regulatory context will undergo significant changes in the second quarter of 2025. The new chairman of the SEC proposed a proactive approach to DeFi regulation in a congressional hearing, outlining three policy directions:

1. Establish an "Innovation Exemption Mechanism" for highly decentralized protocols.
2. Promote the "Functional Classification Regulatory Framework"
3. Incorporate DAO governance structure and Real-World Asset (RWA) projects into the open finance regulatory sandbox.

This policy shift marks a transition in regulatory thinking from "enforcement first" to "function adaptation," bringing new development opportunities to the Decentralized Finance industry.

II. Evolution of U.S. Regulatory Path: From "De Facto Illegal" to "Function Adaptation"

The evolution of the U.S. regulation of DeFi reflects the process by which financial compliance frameworks address the challenges posed by emerging technologies. Early regulation was based on traditional securities determination standards such as the Howey Test, presuming most DeFi protocols to be unregistered securities. Between 2021 and 2022, the SEC undertook a series of high-profile enforcement actions, investigating several well-known projects.

However, this "law enforcement first" strategy quickly faced challenges. Court rulings and ongoing disputes exposed the limitations of traditional regulatory frameworks under decentralized conditions. At the same time, regulatory agencies also find it difficult to effectively manage new structures like DAOs.

In early 2025, the SEC underwent a strategic adjustment after personnel changes. The new chairman advocates for "technological neutrality" as a regulatory baseline, emphasizing the design of regulatory boundaries based on functionality rather than the means of technological implementation. An "DeFi strategy research group" has been established within the SEC to construct a risk classification and governance assessment system through data modeling, protocol testing, and other methods.

This technology-oriented, risk-layered regulatory approach represents a transition to "functionally adaptive regulation." The SEC is attempting to build a more resilient and iterative regulatory strategy that ensures market stability and user rights while avoiding the suppression of technological innovation.

3. Three Major Wealth Codes: Value Reassessment under Institutional Logic

With the new SEC policy in place, the DeFi sector is experiencing a long-awaited positive institutional incentive. The market is beginning to reassess the underlying value of DeFi protocols, with several suppressed valuation tracks showing revaluation potential. From an institutional logic perspective, the current value reassessment in the DeFi field mainly focuses on three directions:

1. Institutional premium of compliant intermediary structure: On-chain KYC services, compliant custody, and front-end operation platforms with high governance transparency will receive higher valuations.

2. Strategic Position of On-chain Liquidity Infrastructure: Underlying facilities such as decentralized trading protocols and oracles will again become the preferred choice for ecological capital inflows.

3. Credit reconstruction of high endogenous return model agreements: Lending agreements with stable cash flows will enter a credit repair cycle.

The common logic behind these three main lines is the rebalancing process of "policy cognition dividend" transforming into "market capital pricing weight." DeFi protocols are able to establish a valuation anchoring mechanism aimed at institutional capital through real on-chain revenue, compliance service capabilities, and more.

4. Market Response: From TVL Surge to Asset Price Revaluation

The SEC's new policy quickly triggered a chain reaction in the market, forming a positive feedback loop of "systematic expectations - capital inflow - asset revaluation". Specific manifestations include:

• The total value locked (TVL) in DeFi has significantly rebounded, with a weekly increase of over 17%.
• The prices of several leading DeFi assets have surged significantly, with increases ranging from 25% to 60%.
• The trend of institutional capital allocation to on-chain assets is evident, with Ondo Finance's OUSG issuance scale increasing by over 40%.
• Centralized exchange stablecoin outflows, DeFi protocol stablecoin net inflows rebound

Despite significant market reactions, asset revaluation is still in its early stages. The price-to-sales ratios of several leading protocols remain well below bull market levels, indicating potential for future valuation increases. At the same time, asset revaluation will also drive the optimization of token economic models, such as reforms in value capture mechanisms like buybacks and dividends.

5. Future Outlook: The Institutional Reconstruction of DeFi and the New Cycle

The SEC's new policy is a key turning point for the DeFi industry towards institutional reconstruction. Future development trends include:

1. Paradigm shift in protocol design: balancing technical advantages with compliance attributes, forming a new paradigm of "embedded compliance".

2. Diversification of business models: Focus on sustainable profitability and expand into new business areas such as RWA.

3. Governance Mechanism Reconstruction: Explore Hybrid Governance Models to Enhance Legitimacy and Execution Power

4. Participants and Capital Structure Transformation: Attract institutional funds, optimize the token economic model.

5. Technological Innovation and Cross-Chain Integration: Promoting breakthroughs in privacy protection, cross-chain interoperability, and other technologies.

However, the institutionalization process of DeFi still faces many challenges, such as policy execution stability, compliance cost control, and privacy protection. All parties in the industry need to collaborate and continuously enhance the overall level of institutionalization and market trust.

6. Conclusion

The SEC's new policy brings both regulations and opportunities for DeFi, promoting the industry's transition from wild growth to compliant development. In the future, DeFi is expected to achieve broader financial inclusion and value reshaping, becoming an important cornerstone of the digital economy. However, the industry still needs to continue its efforts in compliance risks, technological security, and user education to truly embark on the long-term prosperous path of unlocking new frontiers of wealth.