Politics

The cost of innovation — Regulations are Web3’s greatest asset

Published

8 months ago

April 27, 2025

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The cost of innovation — Regulations are Web3’s greatest asset

Opinion by: Hedi Navazan, chief compliance officer at 1inch

Web3 needs a clear regulatory system that addresses innovation bottlenecks and user safety in decentralized finance (DeFi). A one-size-fits-all approach cannot be achieved to regulate DeFi. The industry needs custom, risk-based approaches that balance innovation, security and compliance.

DeFi’s challenges and rules

A common critique is that regulatory scrutiny leads to the death of innovation, tracing this situation back to the Biden administration. In 2022, uncertainty for crypto businesses increased following lawsuits against Coinbase, Binance and OpenSea for alleged violations of securities laws.

Under the US administration, the Securities and Exchange Commission agreed to dismiss the lawsuit against Coinbase, as the agency reversed the crypto stance, hinting at a path toward regulation with clear boundaries.

Many would argue that the same risk is the same rule. Imposing traditional finance requirements on DeFi simply will not work from many aspects but the most technical challenges.

Openness, transparency, immutability, and automation are key parameters of DeFi. Without clear regulations, however, the prevalent issue of “Ponzi-like schemes” can divert focus from effective innovation use cases to conjuring a “deceptive perception” of blockchain technology.

Guidance and clarity from regulatory bodies can reduce significant risks for retail users.

Policymakers should take time to understand DeFi’s architecture before introducing restrictive measures. DeFi needs risk-based regulatory models that understand its architecture and address illicit activity and consumer protection.

Self-regulatory frameworks cultivate transparency and security in DeFi

The entire industry highly recommends implementing a self-regulatory framework that ensures continuous innovation while simultaneously ensuring consumer safety and financial transparency.

Take the example of DeFi platforms that have taken a self-regulatory approach by implementing robust security measures, including transaction monitoring, wallet screening and implementing a blacklist mechanism that restricts a wallet of suspicion with illicit activity.

Sound security measures would help DeFi projects monitor onchain activity and prevent system misuse. Self-regulation can help DeFi projects operate with greater legitimacy, yet it may not be the only solution.

Clear structure and governance are key

It’s no secret that institutional players are waiting for the regulatory green light. Adding to the list of regulatory frameworks, Markets in Crypto-Assets (MiCA) sets stepping stones for future DeFi regulations that can lead to institutional adoption of DeFi. It provides businesses with regulatory clarity and a framework to operate.

Many crypto projects will struggle and die as a result of higher compliance costs associated with MiCA, which will enforce a more reliable ecosystem by requiring augmented transparency from issuers and quickly attract institutional capital for innovation. Clear regulations will lead to more investments in projects that support investor trust.

Anonymity in crypto is quickly disappearing. Blockchain analytics tools, regulators and companies can monitor suspicious activity while preserving user privacy to some extent. Future adaptations of MiCA regulations can enable compliance-focused DeFi solutions, such as compliant liquidity pools and blockchain-based identity verification.

Regulatory clarity can break barriers to DeFi integration

The banks’ iron gate has been another significant barrier. Compliance officers frequently witness banks erect walls to keep crypto out. Bank supervisors distance companies that are out of compliance, even if it’s indirect scrutiny or fines, slamming doors on crypto projects’ financial operations.

Clear regulations will address this issue and make compliance a facilitator, not a barrier, for DeFi and banking integration. In the future, traditional banks will integrate DeFi. Institutions will not replace banks but will merge DeFi’s efficiencies with TradFi’s structure.

Recent: Hester Peirce calls for SEC rulemaking to ‘bake in’ crypto regulation

The repeal of Staff Accounting Bulletin (SAB) 121 in January 2025 mitigated accounting burdens for banks to recognize crypto assets held for customers as both assets and liabilities on their balance sheets. The previous laws created hurdles of increased capital reserve requirements and other regulatory challenges.

SAB 122 aims to provide structured solutions from reactive compliance to proactive financial integration — a step toward creating DeFi and banking synergy. Crypto companies must still follow accounting principles and disclosure requirements to protect crypto assets.

Clear regulations can increase the frequency of banking use cases, such as custody, reserve backing, asset tokenization, stablecoin issuance and offering accounts to digital asset businesses.

Building bridges between regulators and innovators in DeFi

Experts pointing out concerns about DeFi’s over-regulation killing innovation can now address them using “regulatory sandboxes.” These dispense startups with a “secure zone” to test their products before committing to full-scale regulatory mandates. For example, startups in the United Kingdom under the Financial Conduct Authority are thriving using this “trial and error” method that has accelerated innovation.

These have enabled businesses to test innovation and business models in a real-world setting under regulator supervision. Sandboxes could be accessible to licensed entities, unregulated startups or companies outside the financial services sector.

Similarly, the European Union’s DLT Pilot Regime advances innovation and competition, encouraging market entry for startups by reducing upfront compliance costs through “gates” that align legal frameworks at each level while upgrading technological innovation.

Clear regulations can cultivate and support innovation through open dialogue between regulators and innovators.

Opinion by: Hedi Navazan, chief compliance officer at 1inch.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Politics

Watchdog criticises ‘unprecedented’ government offer to delay local elections – as five councils confirm requests for postponement

Published

12 hours ago

December 19, 2025

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Watchdog criticises 'unprecedented' government offer to delay local elections – as five councils confirm requests for postponement

The elections watchdog has criticised the government for offering to consider delaying 63 local council elections next year – as five authorities confirmed to Sky News that they would ask for a postponement.

On Thursday, hours before parliament began its Christmas recess, the government revealed that councils were being sent a letter asking if they thought elections should be delayed in their areas due to challenges around delivering local government reorganisation plans.

The chief executive of the Electoral Commission, Vijay Rangarajan, hit out at the announcement on Friday, saying he was “concerned” that some elections could be postponed, with some having already been deferred from 2025.

“We are disappointed by both the timing and substance of the statement. Scheduled elections should, as a rule, go ahead as planned, and only be postponed in exceptional circumstances,” he said in a statement.

“Decisions on any postponements will not be taken until mid-January, less than three months before the scheduled May 2026 elections are due to begin.

“This uncertainty is unprecedented and will not help campaigners and administrators who need time to prepare for their important roles.”

Mr Rangarajan added: “We very much recognise the pressures on local government, but these late changes do not help administrators. Parties and candidates have already been preparing for some time, and will be understandably concerned.”

He said “capacity constraints” were not a “legitimate reason for delaying long planned elections”, which risked “affecting the legitimacy of local decision-making and damaging public confidence”.

The watchdog chief also said there was “a clear conflict of interest in asking existing councils to decide how long it will be before they are answerable to voters”.

Sky News contacted the 63 councils that have been sent the letter about potentially delaying their elections.

At the time of publication, 17 authorities had replied with their decisions, while 33 said they would make up their minds before the government’s deadline of 15 January.

Many councils told Sky News they were surprised at yesterday’s announcement, saying that they had been fully intending to hold their polls as scheduled.

They said they were now working to understand the appropriate democratic mechanism for deciding whether to request a postponement of elections. Some local authorities believe it should be a decision made by their full council, while others will leave it up to council leaders or cabinet members to decide.

Multiple councils also emphasised in statements to Sky News that the ultimate decision to delay elections lay with the government.

Reform UK has threatened legal action against ministers, accusing Labour and the Tories of “colluding” to postpone elections in order to lock other parties out of power – a sentiment echoed by Liberal Democrat leader Sir Ed Davey.

But shadow local government secretary Sir James Cleverly told Sky News this morning that the Conservative Party “wants these elections to go ahead”. Sky News understands that the national party is making that position clear to local leaders.

A spokesperson for the Ministry of Housing, Communities, and Local Government, said it was taking a “locally-led approach”, and emphasised that “councils are in the best position to judge the impact of postponements on their area”.

They added: “These are exceptional circumstances where councils have told us they’re struggling to prepare for resource-intensive elections to councils that will shortly be abolished, while also reorganising into more efficient authorities that can better serve local residents.

“There is a clear precedent for postponing local elections where local government reorganisation is in progress, as happened in 2019 and 2022.”

The five councils that confirmed they would be seeking postponements were:

Blackburn with Darwen Council (Labour);
Chorley Borough Council (Labour);
East Sussex County Council (Conservative minority);
Hastings Borough Council (Green minority);
West Sussex County Council (Conservative).

The councils in Chorley, and East and West Sussex, had decided prior to Thursday’s government announcement that they would request a delay.

An East Sussex County Council spokesperson told Sky News: “It is welcome that the government is listening to local leaders and has heard the case for focussing our resources on delivery in East Sussex, particularly with devolution and reorganisation of local government, as well as delivering services to residents, such high priorities.”

They also pointed to the cost of electing councillors for a term of just one year, and argued that it would be “more prudent for just one set of elections to be held in 2027”.

West Sussex County Council echoed those reasons and said it would cost taxpayers across the county £9m to hold elections in 2026, 2027, and 2028, as currently planned.

Chorley and Blackburn councils also cited the cost of delivering elections, and said they would prefer that money be spent on delivering the local government reorganisation and delivering services to local residents.

Meanwhile, 12 councils confirmed to Sky News that they would not be requesting delays:

Basingstoke and Deane Borough Council (Liberal Democrat-Independents);
Broxbourne Borough Council (Conservative);
Colchester City Council (Labour-Liberal Democrat);
Eastleigh Borough Council (Liberal Democrat);
Essex County Council (Conservative);
Hart District Council (Liberal Democrat-Community Campaign);
Hastings Borough Council (Green minority);
Isle of Wight Council (no overall control);
Newcastle-under-Lyme Borough Council (Conservative);
Portsmouth City Council (Liberal Democrat minority);
Rushmoor Borough Council (Labour minority);
Southampton City Council (Labour).

Politics

Samourai co-founder claims Biden-era lawfare in calling for Trump pardon

Published

13 hours ago

December 19, 2025

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Samourai co-founder claims Biden-era lawfare in calling for Trump pardon

Keonne Rodriguez, who pleaded guilty to one felony count related to his role at Samourai Wallet, is calling on US President Donald Trump to pardon him, citing similar language that has been successful in previous pardon applications.

In a Thursday X post, Rodriguez said he would report to prison on Friday, where he will serve a five-year sentence for operating an illegal money transmitter. The Samourai co-founder claimed there were no “victims” to his crime, and blamed his incarceration on “lawfare perpetrated by a weaponized Biden DOJ.”

In a message tagging Trump, Rodriguez expressed hope that the US president would issue a federal pardon for him and William “Bill” Lonergan Hill, another Samourai executive who pleaded guilty and was sentenced to four years. Rodriguez blamed “activist judges” for his legal troubles, claiming he was targeted by a “political anti-innovation agenda.”

“I maintain hope that [Trump] is a fair man, a man of the people, who will see this prosecution for what it was: an anti innovation, anti american, attack on the rights and liberties of free people,” said Rodriguez. “I believe his team […] and others truly want to end the weaponization of the DOJ that the previous administration wielded so effectively […] I believe he will continue to wield that power for good and pardon me and Bill.”

Bitcoin Wallet, Law, Politics, Court, Crimes, Donald Trump — *Source:* *Keonne Rodriguez*

Rodriguez’s public plea followed Trump’s statement that he would “take a look” at a pardon for the Samourai co-founder, claiming that he had no knowledge of the case. It’s unclear whether Rodriguez filed an official application for a pardon or is relying on public statements to get the president’s attention.

Other crypto execs successfully lobbied for a Trump pardon

One of Trump’s first acts as president in January was to issue a pardon for Silk Road founder Ross Ulbricht, who had been serving a life sentence for his role in creating and operating the darknet marketplace.

Former Binance CEO Changpeng “CZ” Zhao, who pleaded guilty to one felony in 2023 related to the exchange’s Anti-Money Laundering program, served four months in prison but also received a pardon from the president. Trump later said he “[knew] nothing about” Zhao when asked about the pardon in a November interview.

Rodriguez’s language addressing Trump mirrored comments from the White House on previous pardons. For example, Press Secretary Karoline Leavitt said it was a “weaponization of justice from the previous administration” when the president commuted the sentence of David Gentile, who was convicted of defrauding “thousands of individual investors in a $1.6 billion” scheme in 2024.