Democrats propose ‘restricted list' for DeFi protocols, sparking outcry

**Democrats Face Backlash Over Proposed DeFi Protocol 'Restricted List' Legislation**

Democratic Senators are under fire from the cryptocurrency community after introducing controversial legislation that would authorize the U.S. Treasury Department to create a "restricted list" targeting risky decentralized finance (DeFi) protocols. The counter-proposal has sparked widespread outcry among blockchain advocates, who argue the measure could severely impact DeFi innovation and cryptocurrency adoption.

The proposed regulatory framework would grant unprecedented government oversight powers over decentralized protocols, potentially affecting billions in DeFi total value locked (TVL) across platforms. Critics warn this centralized approach contradicts the fundamental principles of decentralized finance and could drive cryptocurrency projects offshore.

The legislation comes amid increasing regulatory scrutiny of the DeFi sector, which has grown exponentially in recent years. Market analysts suggest this regulatory uncertainty could impact Bitcoin and broader cryptocurrency prices as investors assess potential compliance costs and operational restrictions.

DeFi protocols, which operate on blockchain networks without traditional intermediaries, have revolutionized cryptocurrency lending, trading, and yield farming. Industry leaders argue that overly restrictive regulations could stifle blockchain innovation and harm the United States' competitive position in the global cryptocurrency market.