Combining that realism with Paul Atkins’ recent speech laying out an America-shaped vision for DeFi, and you have to admit, that’s pretty refreshing. He envisions an innovation paradise, with the greatest economic liberty in the world, and a country far out in front of everyone else when it comes to crypto. He even has the chutzpah to dub it the “American DeFi thesis,” presenting it as a new frontier of free-market ideas. Before we get too swept up by the land of opportunity, give me a minute here. If history has shown us anything, it’s that the best intentions—however well-meaning—don’t always come to fruition.

Overcoming Deep-Seated Psychological Barriers

Atkins can advocate for self custody wallets as extensions of private property rights until the cows come home. But how many average Americans truly appreciate what it means to hold their own keys. We’re referring to a population that can’t tell the difference between a phishing email and their bank’s correspondence. Asking them to be their own bank, their own security professional, their own IT department? That's a huge leap.

Consider this: people still trust centralized exchanges despite the FTX debacle. Why? Because it's easier. It's what they're used to. Removing this inertia, this built habit of defaulting to intermediaries, takes more than government mandated frameworks alone. It requires deep and widespread transformational education, visionary and intuitive user experience design, and a foundational change in societal approach to risk and responsibility. Until we work to overcome these psychological barriers, Atkins’ vision is in danger of becoming a rich person’s techie fantasyland.

Regulatory Capture: The Looming Threat

Atkins' desire to foster innovation is commendable. His general proposed “innovation exemption” framework, or regulatory sandbox, is very encouraging. Who gets to play in that sandbox? Who defines the rules?

Here's where my skepticism kicks in. The history of financial regulation has been marked by numerous examples of regulatory capture. In these instances, established industry titans use regulations as a weapon—manipulating them to benefit themselves at the expense of smaller competitors and consumers. The large banks and entrenched financial powers won’t sit idly by while DeFi rips apart their kingdoms. We’re prepared for them to act to defend their supremacy! They use lobbyists, and they use lobbyists to use their resources. Selfishly motivated by a clear conflict of interest, they engineer the regulatory environment to serve their interests.

Think about it this way: Atkins' comparison of open-source developers to automakers is clever, but incomplete. Contrary to claims by corporate interests, automakers remain under the iron fist of competitive capitalism. Will DeFi developers face similar scrutiny? And if so, who will be under the watchful eye? If we allow today’s financial incumbents to cement their power, they might use the “innovation exemption” against us to turn this weapon on innovators. This would prevent genuine decentralization from taking root, entrenching the current financial order’s stranglehold on power. This brings us to the role of fear and anxiety.

Ethical Questions Remain Unanswered

DeFi can indeed live up to its promises of greater financial inclusion if we let it. Or will it simply exacerbate existing inequalities? Given that DeFi protocols are already complicated and rife with threats such as rug pulls, the possibility for algorithmic bias presents a heavy dose of ethical conundrums.

Let’s not kid ourselves — DeFi doesn’t exactly have the best rap sheet. It’s been exploited to aid money laundering, tax evasion, and other criminal enterprises. Atkins’ speech is an implicit endorsement of DeFi’s resilience in times of market stress. It conveniently ignores that such “stability” may have been largely fueled by the dark money of criminal enterprises in need of a safe haven.

So what is being done about the risks here, including the new forms of financial exclusion they might create? What about everyone else, who don’t have $20 and up in gas fees they can afford to pay on Ethereum? What do we do for those who don’t have the technical expertise to understand the intricacies of the various DeFi protocols? Are we just making a system where the rich get richer, and the rest just are not able to keep up?

These are not just hypothetical questions. These are not frivolous issues. They are genuine concerns that we must take seriously and address directly. Atkins’ vision of American DeFi cannot be a superficial manifesto for an unabashedly innovation-at-all-costs economic liberty. It needs to be a commitment to ethical development, responsible regulation, and ensuring that the benefits of decentralized finance are shared by all, not just a select few.

Atkins’ comments are a promising sign, but we’ve heard all this before in the form of empty promises. What we’d like to see is some real follow-through, more transparent decision-making, and an actual commitment to defending the interests of actual Americans. Otherwise, this “American DeFi thesis” will end up being just that – a thesis, not a reality.