Source: Cointelegraph Original: "{title}"

The founder of SilentSwap, a privacy-focused trading platform, Shibtoshi, outlined several issues that make institutions hesitant to adopt DeFi solutions, including privacy concerns, a lack of standardized compliance regulations, and legal liabilities.

Shibtoshi told Cointelegraph that the high transparency of on-chain transactions poses a problem for companies that must conceal sensitive information, such as trading strategies, salary information, and business-to-business agreements. He claimed, "The main concerns—regulatory uncertainty, privacy limitations, and a complex user experience—are real but can be addressed. Innovations in privacy-preserving protocols are making DeFi increasingly compatible with enterprise needs. Platforms like SilentSwap are steps in that direction."

Shibtoshi added that regulatory uncertainty remains one of the biggest issues facing DeFi and that the fragmented approaches taken by various legal jurisdictions further hinder institutional adoption.

In an interview with Cointelegraph, the founder of SilentSwap stated, "Are DeFi tokens securities? If a decentralized autonomous organization (DAO) messes up—who is responsible? These questions remain quite murky."

Shibtoshi called for the establishment of reasonable regulatory policies to encourage innovation while maintaining the value propositions of decentralized finance, including self-custody, speed, and cost-effective transactions.

The total value locked in the DeFi ecosystem has yet to recover to the peak levels of 2021 and 2022. Source: DeFiLlama

U.S. Congress Overturns Outdated DeFi Rules, but DeFi Still Faces Danger

Both chambers of the U.S. Congress recently voted to overturn the controversial DeFi broker rules, which required decentralized finance protocols and platforms to report customer transactions to the Internal Revenue Service (IRS).

The U.S. Senate voted 70 to 27 to repeal the IRS broker rules on March 4, followed by a vote in the House of Representatives on March 11 to also repeal the rule.

Despite the repeal of this outdated rule, excessive regulation could ultimately stifle a sector that serves as a decentralized, more accessible, and anonymized alternative to traditional finance.

According to crypto entrepreneur and investor Artem Tolkachev, regulatory compliance is undermining the decentralization of DeFi and destroying the value proposition of this emerging field.

Tolkachev wrote that an overemphasis on regulatory compliance increases the likelihood of scrutiny and shifts control from users to third-party intermediaries and large institutions.

Related: Reports indicate that Japan will classify cryptocurrencies as financial products.

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