In a noteworthy regulatory advancement for the cryptocurrency sector, the US House of Representatives took the decisive step of overturning a bill that jeopardized the privacy-focused aspects of decentralized finance (DeFi) protocols.
Within the broader crypto environment, a crucial governance initiative on the Solana network was turned down; it aimed to implement a strategy to diminish Solana’s inflation rate by approximately 80%.
US House joins Senate in rejecting IRS DeFi broker rule
The US House of Representatives cast a vote to rescind a rule that mandated decentralized finance (DeFi) protocols to report to the Internal Revenue Service.
On March 11, the House voted 292 in favor and 132 against a motion to repeal the so-called IRS DeFi broker rule, which sought to extend existing IRS reporting obligations to cryptocurrency.
All 132 votes to maintain the rule came from Democrats. Nevertheless, 76 Democrats collaborated with Republicans to annul it.
This decision followed a vote in the Senate on March 4 that passed the motion with a count of 70 to 27.
The rule would have required DeFi platforms, such as decentralized exchanges, to report gross proceeds from cryptocurrency sales, including taxpayer details involved in those transactions.
Following the vote, Representative Mike Carey, who proposed the repeal motion, stated, “The DeFi broker rule invades the privacy of millions of Americans, stifles the growth of a vital new industry in the United States, and would overwhelm the IRS.”
Representative Mike Carey commenting after the vote.
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Solana’s inflation reduction proposal fails to pass
A proposal to significantly alter Solana’s inflation structure was turned down by stakeholders but is still celebrated as a triumph for the governance process of the network.
“Even though our proposal didn’t succeed, this is a significant victory for the Solana ecosystem and its governance mechanism,” noted co-founder of Multicoin Capital, Tushar Jain, on March 14.
Approximately 74% of the staked supply voted on proposal SIMD-228 across 910 validators, but only 43.6% were in favor, while 27.4% opposed and 3.3% abstained, as indicated by Dune Analytics. The proposal required a 66.67% approval to pass but garnered only 61.4%.
Jain remarked that this was the largest crypto governance vote in terms of participation and market cap in any ecosystem, chain, or network.
“This served as a meaningful scaling stress test—a social, rather than technical, stress test—and the network performed well despite a significant divergence of opinions and interests.”
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Potential Bitcoin retracement to $70,000 amidst “macro correction”— Analysts
Bitcoin’s potential retracement to $70,000 may be a natural part of the ongoing bull market, despite concerns from investors about an imminent bear market cycle.
Bitcoin (BTC) saw a drop of over 14% in the past week, closing at around $80,708 after investors expressed disappointment with the lack of direct federal Bitcoin investments in a recent executive order regarding Bitcoin reserves from seized cryptocurrencies.
Even with this dip in investor confidence, cryptocurrencies and global markets are undergoing a “macro correction” as part of the bull market, according to Aurelie Barthere, a principal research analyst.
BTC/USD, 1-month chart.
The analyst pointed out that many cryptocurrencies have breached critical support levels, complicating the forecasting of the next significant price levels:
“This is part of a macro correction (as US tech is projected to decline by 3%), so we need to keep an eye on BTC. The following target will be $71,000 – $72,000, the peak of the pre-election trading range.”
She further explained, “We remain in a correction within a bull market: Stocks and crypto are adjusting and pricing in a period of tariff uncertainty and fiscal reductions, without a safety net from the Fed. Fears of recession are emerging.”
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Stricter regulations urged for political memecoins after $4 billion collapse
Industry experts have called for enhanced investor protections and liquidity measures for cryptocurrencies backed by political figures to avoid another major market downturn.
Investor confidence has been shaken following the collapse of the Libra (LIBRA) token, which was supported by the Argentine President, leading to a staggering loss of $4 billion in market capitalization due to insider cash-outs.
Blockchain analytics firm DWF Labs reported that at least eight insider wallets withdrew $107 million in liquidity, causing the precipitous decline.
To prevent similar situations in the future, tokens endorsed by high-profile figures will require more stringent safety and economic strategies, such as locking liquidity or imposing a non-sellable period on tokens within the liquidity pool, according to DWF Labs’ report.
The report emphasized that tokens associated with prominent leaders should also have launch restrictions to limit participation from automated trading systems and large holders.
“Mitigating the activity of bots and whales is crucial in minimizing the effects of individuals acting on insider knowledge to accumulate a significant portion of the token supply,” asserted Andrei Grachev, managing partner at DWF Labs.
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Hyperliquid raises margin requirements after $4 million liquidation incident
Hyperliquid, a trading-focused blockchain network, has raised margin requirements for traders following a massive loss in its liquidity pool during a significant Ethereum (ETH) liquidation.
On March 12, a trader intentionally liquidated a long position in Ether worth approximately $200 million, resulting in a $4 million loss for Hyperliquid’s liquidity pool.
Beginning March 15, Hyperliquid will mandate that traders maintain a minimum collateral margin of 20% on specific open positions to “diminish the systemic impact of large positions when closing,” as stated in their announcement.
This event highlights the challenges confronting Hyperliquid, which is becoming one of the most prominent platforms in Web3 for leveraged perpetual trading.
Hyperliquid has revised its margin requirements for traders.
Hyperliquid clarified that the $4 million loss was not due to a system exploit but rather a foreseeable outcome of its trading mechanics under extreme circumstances.
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DeFi market overview
Based on data from analyses, the majority of the top 100 cryptocurrencies by market capitalization experienced declines over the past week.
Among these, the Hedera (HBAR) token suffered the largest weekly decline, dropping over 24%, followed by JasmyCoin (JASMY), which decreased by more than 21% during the week.
Total value locked in DeFi.
We appreciate your interest in our overview of this week’s most significant DeFi developments. Please join us next Friday for more stories, insights, and education in this rapidly evolving space.