Two giants of the crypto industry — Hyperliquid Policy Center (HPC) and non-custodial wallet provider Phantom — have joined forces to send a clear and unambiguous signal to the U.S. Commodity Futures Trading Commission (CFTC): regulations designed for TradFi should not stifle DeFi.
The joint comment, submitted in response to a CFTC request on June 18, is not just a formality. It is a strategic maneuver aimed at redefining the very nature of the relationship between the regulator and decentralized finance. The key message: software for on-chain protocols is not an exchange or a clearinghouse. It is a tool, not an intermediary. Regulating it under the same templates as traditional financial companies would mean stifling innovation.
Three Pillars of a New Regulatory Reality
In their submission, HPC and Phantom put forward three specific proposals that essentially form a roadmap for the future regulation of DeFi in the U.S.
First and most fundamental: publishing software for on-chain protocols should not automatically be equated with registering as an exchange. Writing code is not managing a market. This is a fundamental distinction that the regulator must recognize.
Second: already registered exchanges and clearinghouses should be allowed to perform regulated functions within on-chain systems. This would make it possible to adapt existing rules for handling derivatives without losing control, but also without forcing market participants to completely abandon the benefits of decentralization.
Third: the exemption granted to Phantom in March should become the norm, not the exception. Other non-custodial wallet providers deserve equally clear guarantees. After all, they do not hold client funds or execute transactions on their behalf — they simply provide an interface.
Self-Custody as the Center of a New Paradigm
At the heart of this entire initiative lies the concept of non-custodial wallets. HPC and Phantom insist: these tools are not intermediaries in the classical sense. They do not hold other people's assets or conduct transactions. Consequently, the requirements imposed on brokers and dealers are not applicable to them.
This approach is not merely a legal nuance. It is a matter of preserving the competitiveness of the U.S. crypto industry. Clear and adequate rules will help retain developers in the U.S., rather than push them out to more friendly jurisdictions. Furthermore, transparent DeFi markets mean not only innovation but also reduced counterparty risks and faster settlements.
The initiative comes amid a shift in direction at the CFTC itself. Chairman Michael Sellig, who took office in December, has consistently advocated for more transparent regulation of the crypto industry, including approving the launch of perpetual futures within the U.S.
"This is our response, and the decision on this matter lies entirely within the commission's competence," HPC and Phantom stated in their joint submission.
Now the ball is in the CFTC's court. Whether the regulator will prepare specific clarifications or launch a new rulemaking process will determine how much on-chain activity remains within U.S. jurisdiction.
Expert opinion: This submission is one of the most well-reasoned and timely moves by the crypto industry in recent years. HPC and Phantom are not simply asking to "leave DeFi alone"; they are offering the regulator a concrete, workable framework that separates the wheat from the chaff: code from intermediation. If the CFTC adopts these principles, it will set a precedent that defines the tone for DeFi regulation not only in the U.S. but globally. If not, we risk seeing an exodus of talent and capital to jurisdictions where innovation is valued more than fear of the unknown.