DEF was created to advocate for policies friendly to decentralized finance (DeFi) globally. Marc Boiron, one of the signatories to the group's multisig and a member of the group's steering committee, told CoinDesk that deploying half the funds quickly was part of the plan communicated to UNI holders from the start.
The fund was formed with 1 million UNI (worth a little over $19 million at press time) after receiving support from holders of Uniswap's UNI governance token. The vote closed on June 29, with 79.7 million UNI voting in favor and 15.0 million voting against. It's only the third proposal to successfully pass the Uniswap community's governance process. Many of the supporters of the proposal were very large wallets, though two of the top 10 largest wallets voting on the measure were in opposition.
"I wouldn't say I feel that we're behind, but if I think that if we were to wait any longer we would be behind," Boiron, who also serves as general counsel at the options exchange dYdX, said in a phone call.
The first order of business for DEF is hiring a policy director, its first staffer. The nascent organization shared the job listing on Twitter on July 2.
Decentralized finance (DeFi) has proven to be one of the biggest drivers of activity in the blockchain industry since mid-2020. There's now more than $100 billion committed to different financial projects across the biggest blockchains. However, these projects don't adhere to the kind of customer scrutiny that the traditional financial world has, and regulators like the U.S. Securities and Exchange Commission have started to pay attention.
When it was first raised as an idea on May 27 on the Uniswap forums by the Harvard Law Blockchain and Fintech Initiative, the post authors wrote, "Governments around the world are considering how they will regulate decentralized finance, and we need to defend the ecosystem and decentralized ideals."
Boiron said, "Two things that DEF plans on focusing on [are]: One, funding organizations that have expertise or can easily gain expertise in DeFi and can advance policy or thought leadership or any of the other goals the fund is looking to advance. And, second, to educate others and organizations on policy and DeFi."
Boiron is a member of an initial committee laid out in the Uniswap proposal. The other members are:
- Larry Sukernik of Reverie
- Rebecca Rettig of Aave
- Jake Chervinsky of Compound Labs
- Katie Biber of Brex
- Sheila Warren of the World Economic Forum (and co-host of a CoinDesk podcast)
- Marvin Ammori of Uniswap Labs
By and large, he said, the crypto policy organizations have not done a lot on DeFi yet but "if we fund them with capital they can use on DeFi specific issues, that's not capital they have to go find elsewhere," he said.
Early on, getting more written content in places that can move policy, such as policy papers from think tanks or op-eds in the pages of large newspapers, will be a high priority for the new policy director. The director will also be part of devising a budget for the organization within 90 days of the proposal passing, as promised in the Uniswap proposal.
The UNI allocation a one-time contribution with no promise of future investment. At roughly $20 million, that's a very strong starting budget for a trade organization.
Facebook and Amazon, two companies with market capitalizations over a billion dollars, were the top spenders, at $19.7 million and $18.7 million, respectively. Alphabet (Google's parent company) came in a somewhat distant third at $8.7 million.
The job listing and the proposal on Uniswap both note that part of the job of the new policy director will be to interface with other decentralized autonomous organizations (DAOs) with an eye toward securing additional funds from other communities. The Harvard group wrote, "We expect other communities will contribute as they wake up to additional threats and rushed proposals targeting them directly."
The fund has been created as a 501(c)(4), a non-profit designation in the U.S. that allows for slightly more political activity than most non-profits are permitted; while the income of such organizations is not taxed, donations to them are generally not tax-deductible. A source familiar with the group told CoinDesk that it planned to move quite quickly and that the first position should be filled very, very soon.
While the first $10 million is likely to go out the door quickly as DEF gets off to a rapid start, the second half will be spent over about five years, to make the organization sustainable, according to Boiron.
The job listing describes a collection of objectives that sound fairly typical of a new policy organization, such as engaging with the media, policymakers and devising an overall strategy. There's already an existing network of policy organizations focused on crypto in the United States, such as Coin Center, the Chamber of Digital Commerce and the Blockchain Association.
For once it seems like the regulators are ahead of industry. Case in point: the Financial Action Task Force, which coordinates anti-crime regulations in finance globally, has explicitly directed its attention to the DeFi industry's lack of know-your-customer measures.
While DEF didn't exist as that conversation was underway, "several of the DeFi education fund members were very involved in exactly that," Boiron said. FATF is holding off finalizing these rules until at least October.
Kristin Smith, executive director of the Blockchain Association, wrote in an email, "There is so much work to be done educating policymakers in Washington, especially when it comes to DeFi. We welcome additional voices in this space and look forward to coordinating with the DeFi Education Fund."
The Harvard Law students argued in their initial proposal:
UPDATE (July 13, 2021, 17:55 UTC): Corrects Grayscale to Genesis in the first paragraph. Both companies are owned by CoinDesk parent Digital Currency Group.
UPDATE (July 13, 2021, 18:25 UTC): A previous version of this story listed Biber as affiliated with Anchorage, her prior employer.