Trump's Fed Chair Nominee Backs Crypto as KelpDAO Hack Rekindles DeFi Risk Fears

Fresh concerns over DeFi security are weighing on sentiment as fallout from KelpDAO's $292 million hack spreads through the market. In Washington, President Donald Trump's pick to lead the Federal Reserve signaled support for crypto's place in the U.S. financial system, while the U.K. moved to bring stablecoins into a unified payments rulebook. Fed chair nominee Kevin Warsh endorses crypto's role At a Tuesday hearing before the Senate Banking Committee, Fed chair nominee Kevin Warsh said digital assets are already embedded in U.S. financial services. Warsh made the remarks in response to a question from Senator Cynthia Lummis on whether the Fed would support deeper crypto integration and continued investment. The comments drew less surprise given Warsh's recent investment disclosures across multiple crypto projects. Still, Senate Banking Committee ranking Democrat Elizabeth Warren warned against the nomination, arguing Warsh would act as a "sock puppet" for Trump's crypto agenda. After the hearing, Bitcoin rose to $78K on Wednesday, its highest level since February. Jefferies flags DeFi contagion risk for tokenization plans Jefferies LLC warned that the KelpDAO exploit and the resulting DeFi contagion could prompt traditional financial firms to slow or pause tokenization initiatives. The incident sparked investor anxiety and contributed to roughly $15 billion in outflows from Aave, the largest DeFi lending platform. Andrew Moss, a research analyst at Jefferies, told Bloomberg that the loss of confidence could create both near-term and longer-term risks, regardless of fault. He said tokenization rollouts across banks, fintechs, and other institutions may "decelerate temporarily" as firms reassess operational and counterparty risk. Moss added that while regulatory clarity has helped accelerate tokenization efforts, the digital-asset sector remains early-stage and needs time to mature. U.K. outlines unified rules for payments, stablecoins, and tokenized deposits The U.K. Treasury said it will introduce a single regulatory framework spanning traditional payments, stablecoins, and tokenized deposits. Treasury and City Minister Lucy Rigby said Tuesday the proposal is intended to prepare the U.K.'s payments sector for rapid financial innovation. The Treasury plans to seek input from the public and industry stakeholders, and the framework would also cover agentic payments. Rigby said the initiative is designed to strengthen the U.K.'s bid to lead in financial technology, a position also being contested by the U.S., Hong Kong, and other jurisdictions. Final take Warsh's supportive stance toward crypto won praise from the industry and criticism from Democrats. Jefferies cautioned that DeFi contagion—underscored by Aave's $15B outflows—could push Wall Street to reconsider the pace of tokenization and broader adoption.