Decentralized Finance Depth Analysis: SEC New Policies Lead to Industry Restructuring, on-chain Finance Welcomes New Opportunities

1. Introduction: Key Turning Point in SEC Policy Shift and DeFi Regulatory Landscape

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

However, the expansion of the industry is accompanied by issues such as regulatory ambiguity, systemic risk, and regulatory vacuums. U.S. regulators have adopted a stricter and more centralized enforcement strategy towards the cryptocurrency industry as a whole, potentially including DeFi protocols, DEX platforms, DAOs, and others in the scope of illegal activities. Between 2022 and 2024, multiple projects have been investigated and enforced by the SEC or CFTC. At the same time, the lack of clear criteria has trapped the entire DeFi industry in difficulties such as technological constraints, capital contraction, and the exodus of developers.

In the second quarter of 2025, significant changes occurred in the regulatory environment. The new chairman of the SEC proposed a positive regulatory exploration path for DeFi during a congressional hearing, outlining three policy directions: establishing an "innovation exemption mechanism" for highly decentralized protocols; promoting a "functional classification regulatory framework"; and including DAO governance and RWA projects in a regulatory sandbox. This shift corresponds with the Treasury Department's white paper released at the same time, which first suggested balancing investor protection and innovation through sandboxes and testing mechanisms.

II. Evolution of U.S. Regulatory Path: From "Default Illegal" to "Functional Adaptation" Transition Logic

The evolution of U.S. regulation of DeFi reflects the process by which financial compliance frameworks address the challenges posed by new technologies. The current policy of the SEC is the product of more than five years of institutional gamesmanship and logical evolution. Understanding the basis for its transformation requires tracing back to the roots of regulatory attitudes, feedback from enforcement events, and the tensions in the application of law.

Since the DeFi ecosystem took shape in 2019, the SEC has primarily relied on the Howey Test framework to classify most DeFi tokens as unregistered securities. Between 2021 and 2022, the SEC took a series of high-profile enforcement actions, investigating or charging multiple projects, demonstrating a strategy of broad coverage and strong crackdown. This "enforcement-first, rules-lagging" approach soon faced challenges. Lawsuits exposed the limitations of regulatory judgments, and the legal applicability of structures like DAOs faced fundamental difficulties.

In early 2025, the SEC underwent a strategic adjustment following personnel changes. The new chairman advocates for "technology-neutral" regulation, emphasizing regulatory boundaries based on functional design. The SEC has established a DeFi research group, utilizing data modeling, protocol testing, and other methods to construct a risk classification system. This represents a transition from traditional securities law to "function-adaptive regulation," using the actual functions of DeFi protocols as the basis for policy design.

Overall, the regulation of DeFi in the United States is evolving from early legal enforcement to institutional consultation, functional identification, and risk guidance. This reflects a deepening understanding of the heterogeneity of technology and represents the regulatory agencies' attempts to introduce new governance paradigms. In the future, how to balance investor protection, system stability, and technological development will be the core challenge for the sustainability of DeFi regulation.

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

With the SEC's new policy coming into effect, the regulatory environment in the U.S. has undergone a substantial shift in its attitude towards Decentralized Finance, bringing positive institutional incentives to the industry. The market is beginning to reassess the underlying value of DeFi protocols, with several previously undervalued sectors showing potential for revaluation. From an institutional logic perspective, the current revaluation of DeFi values is mainly concentrated in three directions:

1. Institutional premium of compliant intermediary structures: The demand for on-chain KYC, anti-money laundering, and risk disclosure services is rising. Projects with a legal structure and permits will gain policy tolerance and investment favor. The "compliant chain" module in Layer2 solutions will also play a key role.

2. Strategic Position of On-chain Liquidity Infrastructure: Decentralized trading protocols serve as the underlying engine of the ecosystem, with legal risks mitigated under the new policies. Coupled with RWA integration, on-chain trading depth and capital efficiency are expected to recover. Infrastructure such as oracle networks will also become key "risk-controlled neutral nodes".

3. The Credit Reconstruction Space for High Internal Yield Protocols: Lending protocols with stable cash flow will welcome credit repair. Under the trend of diversified collateral, on-chain stablecoins are expected to build an institutional moat against centralized stablecoins, enhancing allocation attractiveness.

These three main lines reflect the rebalancing from "policy cognitive dividends" to "market capital pricing weights". DeFi protocols establish a valuation anchoring mechanism aimed at institutional capital through real revenue, compliance capabilities, and participation thresholds. This enables DeFi to reconstruct the "risk premium-return model", creating institutional prerequisites for integrating into the traditional financial system.

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 "system expectations - capital inflow - asset revaluation." The total value locked (TVL) in DeFi has significantly rebounded, jumping from $46 billion to $54 billion within a week, an increase of over 17%. Multiple leading protocols have seen a simultaneous increase in their locked assets, and on-chain activity has fully warmed up. This indicates that the regulatory signals have effectively alleviated investors' concerns about legal risks, promoting the injection of incremental funds.

The influx of funds has driven the revaluation of DeFi asset prices. The average increase of major governance tokens within a week is 25%-60%, far exceeding BTC and ETH. The market has begun to use metrics such as profit multiples and TVL multiples to evaluate DeFi protocols, marking a transition towards a more mature capital pricing stage.

On-chain data shows changes in the distribution structure of funds. In protocols with high integration with RWA, the proportion of institutional wallets has increased, indicating that some institutional funds are allocating on-chain fixed income assets through DeFi platforms. The inflow of stablecoins into centralized exchanges has declined, while net inflows of stablecoins into DeFi protocols have rebounded, suggesting that investors' confidence in the security of on-chain assets has been restored.

Despite the significant market reaction, asset revaluation is still in its preliminary stage. DeFi protocols still face issues such as regulatory trial-and-error costs and governance efficiency, leading the market to remain cautious. However, the resonance of "risk contraction + value repair" opens up valuation space for the mid-term market. Currently, the P/S of several leading protocols is still far below bull market levels, with upward momentum under real income growth. Asset revaluation will also transmit to the token mechanism, driving protocols to incorporate "value capture" into the market pricing logic.

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 restructuring. The future development of DeFi will show the following trends:

1. Institutional restructuring profoundly impacts design paradigms and business models. DeFi protocols need to design a dual identity system that combines technical advantages with compliance attributes, forming a new paradigm of "embedded compliance."

2. Diversification and deepening of business models. The project will focus more on building sustainable profit models, such as revenue sharing at the protocol layer and RWA on-chain, forming a revenue closed loop comparable to traditional finance.

3. The reconstruction of the governance mechanism has become the core driving force. Explore legally effective governance frameworks and adopt a hybrid governance model to enhance legitimacy and execution.

4. Transformation of participants and capital structure. The threshold for institutional investors has been lowered, giving rise to customized Decentralized Finance products. The insurance, credit, and derivatives markets are expected to experience explosive growth.

5. Technological innovation and cross-chain integration support development. The acceleration of technological innovations such as privacy protection and identity authentication, along with cross-chain protocols achieving multi-chain ecological integration, promote the Depth integration of DeFi and traditional finance.

However, challenges still exist. Stability in policy implementation, control of compliance costs, balancing privacy protection and transparency are all key issues. The industry needs to collaboratively promote the establishment of standards and self-discipline mechanisms, continuously enhancing the overall level of institutionalization and market trust.

VI. Conclusion

Decentralized Finance is at a critical juncture of institutional reconstruction and technological upgrade. The new SEC policy brings an environment where regulation and opportunity coexist, pushing the industry from reckless growth towards compliant development. In the future, DeFi is expected to achieve broader financial inclusion and value reconstruction, becoming an important cornerstone of the digital economy. However, the industry still needs to continue its efforts in compliance risks, technical security, and user education to embark on a long-term prosperous path to new wealth frontiers. With the new SEC policy, from "innovation exemption" to "on-chain finance" may trigger a comprehensive explosion, the summer of DeFi may reappear, and blue-chip tokens in the DeFi sector may welcome a value reassessment.