US stablecoin regulations are moving forward, but DeFi lending markets still face risks that stronger reserve requirements cannot address. Mike Hathaway and Joseph Quintilian of Ajna warned that governance changes and faulty price feeds can affect loans after lenders commit funds.
Their concerns come as the Federal Reserve proposes new rules under the GENIUS Act. The framework seeks to strengthen stablecoin reserves, capital requirements and risk management. Yet those protections do not extend to every lending market that accepts stablecoins.
The distinction matters for institutions entering decentralized finance. While stablecoins may carry stronger issuer safeguards, lending agreements can still depend on outside pricing systems and decisions by token holders.
The Federal Reserve recently proposed two rules to implement the GENIUS Act. The measures require stablecoin issuers to maintain reserve assets and meet new capital and risk-management standards.
Under the proposal, issuers must honor redemptions within two business days. They must also report their outstanding stablecoin supply each month. The law takes effect on January 18, 2027, or 120 days after regulators issue final rules, whichever comes first.
These requirements would give stablecoins clearer operating standards. They could also support broader uses, including debt payments and the circulation of US dollars through digital networks.
Still, Hathaway and Quintilian identified a gap between stablecoin safeguards and DeFi lending protections. They argued that backing a token does not prevent changes to the markets where lenders deposit it.
The central question becomes clear: Who can change a loan's terms after lenders have already committed their money?
Many DeFi platforms use price oracles to determine collateral values and liquidation levels. Meanwhile, governance token holders can vote to change lending parameters, including rates and collateral requirements.
Curated lending vaults have helped institutions access these markets. They offer selected opportunities and familiar risk assessments. However, shared pricing systems and risk managers can also connect losses across platforms.
Several incidents illustrate those concerns. In November 2025, Stream Finance suffered a USD 93 million loss. Analysts identified approximately USD 285 million in potential exposure across Euler, Silo, Morpho and other protocols.
In February, a Moonwell governance vote introduced a faulty price feed. It valued Coinbase Wrapped Staked ETH at roughly USD 1.12 instead of USD 2,200, resulting in approximately USD 1.78 million in bad debt.
March brought another incident when outdated Aave risk settings undervalued wrapped staked ether by 2.85%. The error triggered about USD 27 million in liquidations. Later, Vesu experienced roughly USD 3 million in liquidations after two minutes of incorrect price data in September.
Ajna's proposed approach removes external price oracles. Lenders instead select their lending prices, while smart contracts determine interest rates through fixed formulas.
Once a pool launches, its rules remain unchanged. However, developers cannot patch existing contracts if defects emerge. Users must move to replacement versions voluntarily.
Read More: How DeFi Lending Works on XRP Ledger: Protocols, Vaults and Borrowing
Beyond DeFi lending, institutional crypto activity continued through custody and securities infrastructure. Coinbase secured a full national trust charter from the Office of the Comptroller of the Currency.
The charter places its trust operations under federal supervision for custody and payments. It does not authorize conventional deposit-taking or lending.
Meanwhile, the New York Stock Exchange selected Avalanche technology for a planned tokenized securities settlement platform. The system aims to support round-the-clock trading across multiple blockchain networks, subject to regulatory approval.
Political and market developments also affected the sector. Democrats won both chambers of Congress, complicating the outlook for the Clarity Act. Separately, US spot Bitcoin ETFs recorded USD 1.28 billion in weekly outflows through November 6.
Those withdrawals pushed annual net flows to negative USD 914 million, according to SoSoValue. At the same time, regulatory scrutiny continued as FinCEN moved to restrict transfers involving MEXC over alleged illicit transactions.
The GENIUS Act seeks to strengthen stablecoin reserves and issuer oversight, but DeFi lending carries separate governance and pricing risks. Recent liquidation incidents show how errors can spread across connected markets. Ajna proposes fixed lending rules and lender-controlled prices, while broader institutional adoption continues alongside regulatory and market changes.