The landscape of decentralized finance (DeFi) is facing a new challenger in the form of centralized finance (CeFi), a hybrid model that combines the benefits of crypto with the familiarity of centralized platforms. While the Trump administration has been seen as supportive of the crypto sector in general, experts like tech attorney Alexander Urbelis believe that U.S. regulators are leaning towards favoring CeFi over DeFi.
In a recent article on Unchained, Urbelis expressed concerns about the dangers of regulators prioritizing centralized crypto businesses. The focus on platforms that comply with anti-money laundering laws and collect user data may pose risks to the principles of decentralization that are core to the DeFi ethos.
So, what exactly sets DeFi apart from CeFi? Blockchain Association co-founder Connor Spelliscy outlined seven key principles of decentralization that distinguish true DeFi projects. These principles include openness, autonomy, permissionlessness, non-custodial control, distribution, neutrality, and economic independence. In contrast, the current CLARITY Act in the U.S. may allow companies to self-certify as decentralized, potentially blurring the lines between true DeFi and centralized platforms.
Spelliscy warned that without clear definitions of decentralization, opportunistic companies could exploit regulatory advantages meant for innovators. This could lead to centralized platforms masquerading as DeFi projects while reaping the benefits intended for true decentralized initiatives.
While the CLARITY Act aims to provide legal clarity for cryptocurrencies, it remains uncertain whether decentralized projects will thrive under the current regulatory environment. Regulators have been more lenient towards major CeFi players like Circle, Binance, and Coinbase, while taking a harsher stance on DeFi developers such as those behind privacy tools like Samourai Wallet and Tornado Cash.
The passage of the GENIUS Act in 2025, which sets the framework for stablecoin issuers, has been seen as a positive step. However, critics argue that the act only sets the stage for further regulation that could undermine decentralization. The U.S. government’s oversight requiring stablecoin issuers to obtain permission and collect user data may hinder the growth of DeFi projects that rely on stablecoins as a key entry point.
In conclusion, while the Trump administration may not actively target decentralized platforms, the regulatory landscape seems to favor CeFi over DeFi. The ongoing debate between the two models highlights the importance of clear definitions and principles to protect the integrity of the DeFi sector in the face of growing competition from centralized finance.