DeFi Depth Research: Institutional Changes and Value Reconstruction Under the New SEC Policy

1. Introduction: Key Turning Point of SEC's New Policies and DeFi Regulatory Landscape

Decentralized Finance ( DeFi ) has rapidly developed since 2018, becoming one of the core pillars of the global crypto asset system. Through open, permissionless financial protocols, DeFi provides a rich array of financial functions such as asset trading, lending, and derivatives, relying on mechanisms like smart contracts and on-chain settlement, fundamentally restructuring traditional financial frameworks. Especially after the "DeFi summer" of 2020, the total locked value ( TVL ) once surpassed 180 billion USD, demonstrating new heights in scalability and market recognition for the sector.

However, the rapid expansion of Decentralized Finance (DeFi) is also accompanied by issues such as regulatory ambiguity and systemic risks. The U.S. Securities and Exchange Commission ( SEC ) has previously adopted stricter regulations on the cryptocurrency industry, including DeFi protocols and DEX platforms in the category of potential violations. Between 2022 and 2024, several projects were investigated by the SEC or CFTC. At the same time, the long-term absence of criteria for determining decentralization and public financing has trapped the DeFi industry in multiple predicaments.

This regulatory context will undergo significant changes in the second quarter of 2025. In early June, the new chairman of the SEC proposed a new path for DeFi regulation at a congressional hearing, outlining three policy directions: first, to establish an "innovation exemption mechanism" for highly decentralized protocols; second, to promote a "functional classification regulatory framework"; and third, to include DAO governance in the regulatory sandbox. This policy shift resonates with the white paper released by the U.S. Department of the Treasury at the same time, aiming to avoid "stifling innovation."

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

The evolution of U.S. regulation on DeFi reflects the challenges that financial compliance frameworks face in responding to emerging technologies. To understand the basis of this transformation, it is necessary to trace back to the regulatory attitudes during the early rise of DeFi, major enforcement events, and the tensions in the application of laws.

Since the DeFi ecosystem took shape in 2019, the SEC has relied on traditional securities determination frameworks such as the Howey Test. Under this standard, most DeFi protocol tokens are presumed to be unregistered securities, posing potential compliance risks. From 2021 to 2022, the SEC took a series of high-profile enforcement actions, investigating projects such as Uniswap Labs. The regulatory tone during this phase can be summarized as "presumed illegal," requiring project parties to prove that they do not constitute securities transactions.

However, this regulatory strategy quickly faced challenges. Multiple litigation cases exposed the limitations of judgment standards under decentralized conditions. At the same time, the SEC faces fundamental difficulties in the legal applicability of structures such as DAOs, lacking effective enforcement tools.

Against the backdrop of accumulated institutional consensus, the SEC made a strategic adjustment at the beginning of 2025. The new chairman advocates for "technological neutrality" as a bottom line, emphasizing the design of regulatory boundaries based on functionality rather than technology. The SEC has established a dedicated research group to construct a risk classification and governance assessment system for DeFi protocols. This represents a transition to "functionally adaptive regulation," using the actual functions of DeFi as the basis for policy.

Overall, the regulation of DeFi in the United States is gradually evolving from early strict applicability to institutional consultation and functional identification. This shift reflects a deeper understanding of technological heterogeneity and represents the regulatory agencies' attempt to introduce new governance paradigms. How to balance investor protection, ensure stability, and promote development in the future will become a key challenge.

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

With the implementation of the SEC's new regulatory policies, the United States' regulatory environment has undergone a substantial shift in its attitude towards DeFi, bringing positive institutional incentives to the sector. The market has begun to reassess the underlying value of DeFi protocols, with several previously undervalued sectors showing potential for revaluation. From an institutional perspective, the current revaluation of the DeFi field mainly focuses on three directions:

First of all, on-chain compliant intermediaries are becoming a new value niche. The market has a structural demand for compliant intermediary services, especially in key areas such as identity verification, anti-money laundering, and risk disclosure. Projects with a clear legal structure and licenses will become a necessary channel for compliance, promoting their valuation to transition from technical tools to institutional infrastructure.

Secondly, on-chain liquidity infrastructure has regained strategic valuation support. Under the new policy, decentralized trading protocols face reduced legal risks, and combined with factors such as RWA, they are expected to achieve systemic repair. On-chain oracles and other infrastructures will also play important roles within the compliance framework.

Once again, DeFi protocols with high endogenous returns will welcome a credit repair cycle. After regulations become clearer, these protocols, with their quantifiable and low-leverage characteristics, have the potential to become a "stable on-chain cash flow carrier." On-chain stablecoins will also build institutional moats under this new positioning.

These three main lines reflect the rebalancing from "policy recognition dividend" to "market pricing weight". DeFi protocols are able to establish valuation anchors aimed at institutional capital through real revenue, compliance capabilities, etc., creating a prerequisite for integration 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 locked value in DeFi ( TVL ) significantly rebounded, with the Ethereum chain TVL surging from $46 billion to $54 billion within a week after the announcement, an increase of over 17%. Multiple mainstream protocols saw simultaneous growth in locked value, and on-chain activity fully revived. This indicates that regulatory signals have effectively alleviated investor concerns and driven the influx of incremental capital.

The return of funds has driven the price reassessment of multiple leading DeFi assets. Governance tokens such as UNI, AAVE, and MKR have seen an average increase of 25%-60% within a week. This rebound reflects the market's re-evaluation of the future cash flow and institutional legitimacy of DeFi protocols. After legitimacy received policy tolerance, the market began to use indicators such as profit and TVL to conduct valuation corrections on the protocols.

On-chain data shows changes in the distribution structure of funds. The deposit transactions and user numbers of multiple protocols have significantly increased, especially in protocols with a high integration of RWA, where the proportion of institutions has risen. The inflow of stablecoins to centralized exchanges has declined, while net inflow to DeFi protocols has rebounded, indicating a recovery in investor confidence. The trend of decentralized finance regaining pricing power for funds is beginning to emerge.

It is worth noting that asset price revaluation is still in its preliminary stage, and the space for institutional premium realization is far from complete. Decentralized Finance still faces issues such as regulatory trial and error costs, and the market remains somewhat cautious. However, the resonance of "institutional risk contraction + value expectation restoration" opens up the space for re-expansion of valuations in the DeFi sector's mid-term market. The price-to-sales ratios of several leading protocols are still far below bull market levels, and regulatory certainty will drive the valuation center upward.

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. Institutionalized reconstruction profoundly impacts design paradigms and business models. DeFi projects 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 the business model. The project party will pay more attention to building a sustainable profit model, such as protocol layer revenue sharing, RWA on-chain, etc., forming a revenue closed loop comparable to traditional finance.

3. The governance mechanism reconstruction becomes the core driving force. In the future, a hybrid governance model may be adopted, combining on-chain voting with legal frameworks to enhance legitimacy and enforcement.

4. Transformation of participants and capital structure. The threshold for institutional investors has been lowered, giving rise to more customized products. Project parties are optimizing token economic models to attract long-term value investment.

5. Technological innovation and cross-chain integration provide support. Innovations in privacy protection, identity authentication, and other technologies accelerate, and cross-chain protocols enable seamless flow within a multi-chain ecosystem.

6. Challenges remain. The stability of policy implementation, control of compliance costs, privacy protection, and other key issues still require collaboration from all parties to promote standard formulation and the construction of self-discipline mechanisms.

VI. Conclusion

Decentralized Finance is at a critical juncture of institutional reconstruction and technological upgrading, with the SEC's new policies bringing an environment of both regulation and opportunity. In the future, DeFi is expected to achieve broader financial inclusivity and value reconstruction, but continuous efforts are still needed in terms of compliance risks and other aspects. From "innovation exemptions" to "on-chain finance," a comprehensive explosion may be on the horizon, and the summer of DeFi may reappear, with blue-chip tokens in the sector likely to welcome a value reassessment.