There has been noticeable growth in various sectors of the crypto ecosystem, but one area that seems to be lagging behind is decentralized finance (DeFi). Patrick Hansen, Circle’s Senior Policy Director for Europe, has pointed out this anomaly and emphasized the need for a complete overhaul in the DeFi sector.
According to Hansen’s observations, the Total Value Locked (TVL) in DeFi has remained stagnant for over three years. This metric is even lower, less than half, when excluding Liquid Staking capital lockup.
Data from DeFiLlama shows that the current DeFi TVL stands at $142.347 billion, a significant decrease from over $220 billion in December 2021. This decline is happening despite the increasing number of decentralized applications (dApps) on Ethereum and other protocols closely tied to smart contract financial applications.
As the crypto industry evolves, Hansen believes there should be a notable difference in locked TVL within the DeFi sector. While acknowledging that TVL alone is not a comprehensive measure of market performance, he emphasizes the urgent need for new innovations and applications in DeFi.
However, the push for innovation may face challenges due to the stringent regulatory environment, especially in the United States. The recent scrutiny from the U.S. Securities and Exchange Commission (SEC) on Uniswap, a leading decentralized exchange protocol, is a clear indication of the regulatory hurdles that DeFi projects may encounter.
Despite the call for innovation by Hansen, it is important to recognize that regulatory obstacles could potentially slow down progress and dampen optimism within the DeFi space.
