Ripple: CTO Debunks DeFi Compliance Use

What to Know:

• Ripple CTO David Schwartz argues against mandatory DeFi compliance tools, emphasizing user choice.
• Schwartz believes DeFi protocols should offer capabilities without imposing them on users.
• Recent XRP Ledger (XRPL) features spotlight optional compliance tools like freeze lists and AMM Clawback.

Ripple CTO David Schwartz has voiced his opposition to the compulsory implementation of DeFi compliance tools, sparking debate within the crypto community. Schwartz argues that such features should remain optional, allowing users to choose whether or not to utilize them. His comments highlight the ongoing tension between regulatory compliance and the decentralized ethos of the crypto space.

Schwartz’s perspective is that DeFi protocols should provide capabilities without mandating their use, emphasizing that adoption should stem from user choice rather than coercion. This stance directly counters arguments suggesting that compliance tools should be embedded at the protocol level. Critics of mandatory compliance argue that it undermines the openness of DeFi by creating centralized gatekeepers.

Nothing about protocol-level compliance suggests that everyone who uses the protocol has to use any of the compliance features if they don’t think they need to. Features generally enable people to do things if they wish to.
— David ‘JoelKatz’ Schwartz (@JoelKatz) November 6, 2025

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Schwartz points to Ripple’s experience with the XRP Ledger (XRPL), which includes optional features like freeze lists and the AMM Clawback Amendment. These features, while changeable by issuers, do not compromise the permissionless nature of the core ledger. This approach caters to both regulated finance onboarding and crypto natives, allowing institutions to handle real-world assets (RWAs) and cross-border payments while giving individual users the option to ignore these features.

The AMM Clawback feature, in particular, presents new opportunities for Ripple USD (RLUSD), Ripple’s recently launched stablecoin. This feature enables tokens issued with Clawback enabled to be used on the native AMM running on XRP Ledger, enhancing the stablecoin’s utility. The activation of amendments like “fixAMMv1_3,” “fixEnforceNFTokenTrustlineV2,” and “fixPayChanCancelAfter” on the XRPL further demonstrates Ripple’s commitment to ongoing development and improvement.

As regulatory scrutiny of the crypto industry intensifies, the debate over DeFi compliance is likely to continue. Schwartz’s emphasis on optionality and user choice underscores the importance of finding a balance between regulatory requirements and the core principles of decentralization. This balance will be crucial for the long-term growth and adoption of DeFi, particularly as institutions increasingly explore opportunities in the crypto space.

Related: XRP Price: $12M Max Pain for Bears

Source: Original article