DeFi and the American Spirit: What the SEC’s New DeFi Stance Means and How to Explore the Sector

In a landmark June 2025 roundtable titled “DeFi and the American Spirit,” U.S. SEC Chair Paul S. Atkins declared that “the American values of economic liberty, private property rights, and innovation are in the DNA of the DeFi movement”. This powerful statement underscored a shifting regulatory stance: the Securities and Exchange Commission is now highlighting decentralized finance (DeFi) as aligned with core principles of freedom, ownership, and technological progress. The SEC’s new approach – moving from heavy enforcement to clearer rulemaking – even considers “innovation exemptions” to reduce legal barriers for DeFi. For new crypto investors, this moment is both exciting and daunting. What exactly is DeFi, and what are its main sectors? This article is written to help you begin understanding what DeFi actually offers — and, if you’re already curious enough to click, maybe even take your first step into exploring or investing in it.

Key Takeaways

DeFi is evolving with U.S. policy support. The SEC’s shift toward structured rulemaking and innovation exemptions marks a new era of engagement, offering clearer ground for decentralized protocols to grow.

Seven core sectors define the DeFi ecosystem. From token swaps and oracle networks to staking and real-world asset tokenization, DeFi now mirrors the breadth of traditional finance—on-chain and accessible.

DeFi.SSI offers a practical entry point. Backed by a diversified index of top DeFi protocols, it provides investors with broad exposure to the sector’s upside—without needing to manage each component manually.

What Is DeFi (Decentralized Finance)?

Put simply, decentralized finance (DeFi) is a blockchain-based financial system that replaces traditional middlemen (like banks and brokers) with smart contracts on public networks. It enables people and organizations to transact directly with each other via cryptocurrencies, eallowing financial interaction and collaboration without needing mutual trust (Code is Law here). The goal is to remove third-party intermediaries from financial activities, which can cut costs and increase speed. For example, on a DeFi platform you might borrow, lend, or trade assets peer-to-peer without asking a bank’s permission. According to Investopedia, “DeFi is an emerging peer-to-peer financial system that uses blockchain and cryptocurrencies to allow people, businesses, or other entities to transact directly with each other,” avoiding centralized. In practice, this means tasks like payments, loans, trading, and investing can happen through code that executes automatically (smart contracts) on networks like Ethereum. DeFi is global, open 24/7, and accessible to anyone with an Internet connection – but it also comes with new risks (bugs, hacks, volatility) that investors should understand.

7 Key Sectors of DeFi

To make the DeFi world easier to grasp, it helps to look at its key sectors. Decentralized finance isn’t a single product; it’s an ecosystem of various applications and services. Below are seven major DeFi sectors and what they do, with 1–2 example protocols in each (noted by their token tickers) drawn from a broad DeFi index. These sectors cover everything from bringing real-world assets on-chain to swapping tokens, lending, staking, yield strategies, stablecoins, and the oracle networks that connect DeFi to real-world data.

1. Swaps and Decentralized Exchanges (DEXs)

One of the most widely used features in DeFi is token swapping via decentralized exchanges (DEXs). As tokens represent all kinds of on-chain assets, the ability to swap between them is the foundational step that enables almost any financial activity on blockchain networks. Unlike centralized exchanges like Coinbase, DEXs let users trade cryptocurrencies directly through smart contracts—no intermediaries involved. In practice, users connect their wallets to a DEX, select the tokens to trade, and the smart contract either matches them with another user or routes the transaction through a liquidity pool to complete the swap automatically.

Uniswap (UNI) is the iconic example of a DEX. Launched on Ethereum, Uniswap introduced the Automated Market Maker (AMM) model, where anyone can become a liquidity provider by depositing token pairs into liquidity pools. Instead of maintaining traditional order books, Uniswap uses an algorithm that sets prices based on supply and demand in each pool. This design allows for continuous liquidity and instant token swaps. Users can exchange, for instance, ETH for USDC within seconds, paying a small fee that is distributed to liquidity providers. Crucially, anyone can contribute liquidity without permission, with all funds secured by smart contracts on-chain.

2. Oracle Networks

The word "oracle" might sound mystical, but in DeFi, it refers to a vital infrastructure layer: systems that deliver real-world data to blockchain applications in a secure and verifiable way. For example, the current price of an asset like ETH or BTC needs to be known on-chain in real time for lending platforms, derivatives, or automated trading systems to function properly. Since the same asset may be traded across multiple venues, and prices constantly update, reliable data synchronization is essential.

In fact, even in traditional finance, price discrepancies are common — for instance, U.S. stock exchanges often report slightly different execution prices for the same stock due to fragmented and aging infrastructure. Oracles solve this problem on-chain by offering fast, tamper-proof price feeds and other external data inputs that smart contracts can trust.

Chainlink (LINK) is the most widely used decentralized oracle network. It pulls in data like crypto prices, converts it into a format smart contracts can use, and does so through a decentralized network of nodes so that the data is not coming from a single, corruptible source.

3. Lending and Borrowing Protocols

Another core pillar of DeFi is lending and borrowing platforms. Lending allows users to deposit their crypto assets into liquidity pools and earn interest, with immediate settlement and no onboarding barriers. Borrowing in DeFi operates differently from traditional loans: because blockchain systems support trustless transactions, most borrowing is overcollateralized. In other words, users must deposit more in collateral than the amount they wish to borrow.

This mechanism isn’t built for emergency liquidity or credit-based lending — it’s often used for leverage or to unlock capital tied up in long-term holdings. For example, a user may deposit ETH and borrow stablecoins to make additional investments while maintaining exposure to ETH.

Aave (AAVE) is one of the leading DeFi lending protocols and a prime example. Lenders provide liquidity to shared pools and earn yield as borrowers draw from them. This direct, smart contract-driven connection between borrowers and lenders is a defining feature of DeFi.

Borrowing also serves another purpose: managing exposure. MakerDAO (MKR) allows users to borrow DAI, a stablecoin pegged to the U.S. dollar, by locking up volatile crypto assets. This doesn’t just create stable purchasing power; it enables users to take synthetic short positions on the dollar, effectively increasing long exposure to other crypto assets. We'll revisit DAI in the Stablecoin section.

4. Stablecoin Infrastructure

Stablecoins are cryptocurrencies designed to maintain a stable value, most commonly pegged to the U.S. dollar. They are a core utility in DeFi, used for trading, lending, and capital preservation amid the volatility of crypto markets. Originally introduced as a store of value, stablecoins have evolved into a foundational mechanism for global payments and value transfer on blockchain networks.

The largest issuers by market share are Tether (USDT) and Circle (USDC). Circle, which recently went public and gained immediate attention from institutional investors, and Tether both claim to hold sufficient reserve assets to back the tokens they issue and offer full redeemability in U.S. dollars. These stablecoins are widely integrated across exchanges, wallets, and DeFi protocols.

New entrants are exploring more capital-efficient models. Ethena (ENA), for instance, issues USDe, a synthetic dollar that doesn’t rely on fiat cash or Treasuries. Instead, it uses a delta-neutral hedging strategy involving derivatives and collateralized ETH positions. This approach seeks to maintain a dollar peg while tapping into yield opportunities inherent to crypto markets.

5. Liquidity Mining and Yield Farming

Liquidity mining involves supplying assets to DeFi protocols to earn returns through a combination of rewards and transaction fees. This typically means providing liquidity to decentralized exchanges (DEXs) or lending platforms. As discussed earlier in the DEX section, this is the foundation of market making in DeFi—participants contribute token pairs to liquidity pools and, in return, receive a share of the protocol's trading fees and, often, additional token incentives.

A more familiar concept to traditional investors is yield farming, which emerged as a simplified framing of liquidity mining. It refers to strategies that seek passive returns from crypto assets, often without the risk of losing principal when applied to stable pairs or conservative lending. Thanks to the composability and speed of blockchain networks, capital can be strategically deployed across platforms through smart contracts in real time.

The trustless and transparent nature of DeFi enables large pools of capital to coordinate automatically, which gave rise to yield aggregators such as Yearn Finance(YFI). These platforms optimize returns by reallocating funds across multiple protocols based on current yields—ideal for users who want to earn income from idle assets without active management.

In today's rate environment, where U.S. Treasury bonds yield over 4%, this return profile has effectively become a benchmark for capital deployment—even on-chain. DeFi yield strategies now often compete with or complement these returns, with additional premiums linked to factors like liquidity risk and token incentives.

6. Staking

Staking is a foundational mechanism in proof-of-stake (PoS) blockchains where users lock up their tokens to help secure the network. It maintains the integrity of the decentralized ledger by aligning incentives: validators risk their staked assets and are penalized for dishonest behavior, such as submitting invalid data to the chain. In return for participating honestly in block validation, stakers earn rewards, typically issued in the same token they stake.

For example, by staking ETH on Ethereum's PoS network, users receive ETH-denominated yield. However, traditional staking comes with a drawback: assets become illiquid during the lock-up period, making them unavailable for trading or other use.

This limitation gave rise to liquid staking protocols. In liquid staking, users receive a liquid token in exchange for their staked assets—a token that reflects both the principal and the accumulating rewards. These tokens can be traded, used as collateral, or deployed in other DeFi strategies, all while the original stake remains active and continues earning yield. In effect, liquid staking unlocks the capital efficiency of staked assets.

A leading example is Lido (LDO), the largest liquid staking provider on Ethereum and several other networks. With Lido, users can stake any amount of ETH and receive stETH (staked ETH) at a 1:1 ratio. The value of stETH increases over time as rewards accumulate, and it can be used across various DeFi platforms or swapped at any time to regain liquidity—offering flexibility without sacrificing yield.

7. Real-World Assets (RWA)/ Tokenized Assets

Real-World Assets (RWA) refer to the tokenization of traditional financial and physical assets—such as cash, government bonds, stocks, real estate, or commodities—onto the blockchain. As a major category within tokenized assets, RWAs have attracted growing attention since 2024, especially as DeFi protocols seek to expand beyond purely crypto-native instruments.

Bringing these assets on-chain enriches the DeFi ecosystem by offering investors new options and enabling more diversified strategies. With RWAs, users can gain exposure to traditional yield-bearing instruments while still benefiting from the transparency, accessibility, and composability of DeFi.

One of the most widely adopted forms of RWA on-chain is U.S. Treasury bonds. Major institutions—including names like BlackRock—have begun tokenizing their Treasury fund products to enable faster settlement and enhanced on-chain transparency. These tokenized instruments not only provide stable yield but also serve as collateral for other DeFi applications, powering lending markets, yield strategies, and more.

DeFi and the American Spirit: Freedom, Fairness, and Financial Access

As you explore the moving parts of the DeFi ecosystem—swapping tokens freely, earning yield without a bank, accessing credit without paperwork—it becomes clear how closely DeFi mirrors core American values. This isn't just a new type of finance. It’s a financial structure rooted in freedom, self-determination, property rights, and open competition.

Decentralized finance lets individuals interact directly, without intermediaries, echoing the free-market ideals that have defined American economic growth. Whether it’s permissionless lending, open access to yield, or using stablecoins as on-chain cash, DeFi supports voluntary, peer-to-peer interaction—not unlike the early principles of American commerce. In DeFi, there’s no gatekeeper deciding who qualifies. Your access depends on your assets, not your background, geography, or credit file.

The recent tone from U.S. regulators confirms this connection. At the 2025 SEC Roundtable, Chair Paul Atkins noted that “economic freedom, property rights, and innovation” are embedded in the DNA of DeFi—calling it a movement that reflects the foundational values of the United States. This rhetorical shift matters. Rather than casting DeFi as a threat, regulators are beginning to frame it as an extension of American ideals into the digital age.

Protocols like Uniswap, Aave, Chainlink, and MakerDAO don’t just represent technical breakthroughs—they represent systems where anyone can participate, where rules are enforced by code, not discretion. DeFi isn’t just about decentralization—it’s about reinforcing the idea that fair, open access to opportunity is a strength, not a liability. For many, that alignment with the American spirit isn’t incidental—it’s exactly why they’re here.

Regulatory Shift: From Scrutiny to Structured Support

Recent developments underscore a clear shift in the SEC’s approach under President Trump’s administration. Alongside signing the Bitcoin Reserve Bill, Trump also repealed the IRS’s “DeFi Broker Rule”—a controversial measure that threatened to classify open-source developers and protocol contributors as financial intermediaries.In step with this broader pivot, the SEC—now led by a more crypto-aligned chair—has adopted a notably different posture. The agency is actively reviewing and approving more spot ETF applications, including those tied to SOL and XRP, and has begun laying the groundwork for a new regulatory framework tailored to DeFi.

At the most recent SEC Crypto Roundtable, Chair Paul Atkins announced the Commission is considering an “innovation exemption”—a conditional path that would allow qualifying DeFi protocols to operate with reduced compliance burdens while a formal rule structure is developed. This concept reflects a meaningful change: instead of relying on case-by-case enforcement, the SEC is now exploring how to integrate decentralized platforms into the financial system with structured, forward-looking policies.

In short, the agency is moving away from a purely punitive stance and toward policy clarity that could enable responsible growth. This is a marked departure from past years, when DeFi activity often triggered aggressive scrutiny or legal action. The updated approach suggests regulators are more willing to engage constructively with the crypto sector—creating space for decentralized finance to expand under more stable oversight. For both investors and builders, this signals a timely opportunity to explore DeFi with stronger confidence and greater transparency as the ecosystem matures.

Gear Up and Let’s Sail: DeFi Is Ready for Its Next Chapter

With regulatory uncertainty beginning to clear, now may be the strongest moment in years to take a closer look at DeFi. The combination of U.S. policy support, technological maturity, and product accessibility means investors can approach the space with more clarity than ever. Major sectors like lending, staking, and real-world assets are no longer experimental—many are actively used, audited, and growing in both user base and capital.

For those looking to get started, DeFi.SSI offers a straightforward way to gain exposure. It’s a single on-chain token backed by a diversified basket of leading DeFi protocols, spanning all the core categories from swaps to oracles to yield strategies. Instead of picking individual projects, DeFi.SSI allows investors to capture broad sector growth in one move—while maintaining transparency, self-custody compatibility, and modular access to the decentralized economy.

As DeFi enters its next phase, supported by a more stable regulatory environment, products like DeFi.SSI can serve as a gateway for investors who want to participate without complexity. The tools are here. The policies are shifting. The timing is finally aligned!