RFS DeFi Risk Intelligence Weekly

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Welcome to another edition of RFS DeFi Risk Intelligence Weekly!

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📉 RFS Risk Scores - Week of September 8, 2025

Market Risk Update: Moderate Stress Persists Amid Policy Uncertainty and Security Concerns

The market remains in a moderate stress zone this week, with a composite risk score of 62 out of 100, reflecting ongoing policy uncertainty, recent security incidents, and volatile ETF flows. Market risk is elevated at 65, as Bitcoin holds above $110K but remains heavily dependent on institutional activity, while ETF flows continue to fluctuate. Liquidity risk sits at 58, with uneven stablecoin market depth and widening slippage bands signaling potential fragility under pressure. Operational and smart contract risk is notably high at 70, driven by recent security events including the Venus Protocol takeover attempt, the Nemo exploit, and supply-chain malware concerns. Governance risk scores 60, reflecting uncertainty around stablecoin issuer regulations amid ongoing GENIUS Act consultations. Meanwhile, reputational and policy risk is moderately elevated at 55, weighed down by the Senate’s market structure draft and increased scrutiny of stablecoins. Overall, until ETF flows stabilize and regulatory clarity improves, caution remains the prudent approach for market participants.

💸 ETF Flows & Liquidity

On September 9, 2025, spot Bitcoin ETFs saw net positive flows overall, led by BlackRock's iShares Bitcoin Trust (IBIT) with $169 million in inflows. This was partially offset by outflows from Grayscale's Bitcoin Trust (GBTC) and other competing funds. 

Key ETF Flow Details

• Total Spot Bitcoin ETFs: Recorded $23.05 million in net inflows.

• BlackRock's IBIT: Was the day's standout performer, pulling in $169 million. It was the only spot Bitcoin ETF to post net inflows on that day. The significant inflows further solidified IBIT's position as the largest Bitcoin ETF by assets under management (AUM), reaching $84.2 billion by September 9.

• Grayscale's GBTC: Saw net outflows, continuing a pattern of gradual decline as investors moved to products with lower fees. Earlier in the month, GBTC had a small inflow, but the long-term trend remains downward.

• Other Bitcoin ETFs: Competitors to IBIT, such as ARK 21Shares (ARKB) and Fidelity's FBTC, experienced outflows on September 9.

• Ethereum ETFs: Gained $44.16 million in net inflows, breaking a six-day streak of outflows. 

Market Context

The flow trends on September 9 occurred within a broader context of cryptocurrency market movements and institutional interest:

• Institutional demand: The sustained inflows, particularly into IBIT, signal renewed institutional demand for crypto assets. Accessible and regulated funds like ETFs continue to be the primary gateway for institutions to enter the crypto market.

• Crypto prices: The positive ETF flows corresponded with a rebound in Bitcoin and Ethereum prices during the week. Bitcoin was trading above $112,000, and Ethereum was also showing strength.

• Macroeconomic factors: General optimism among investors about potential interest rate cuts by the Federal Reserve may have also contributed to the buying interest in risk-on assets like crypto, though no rate cuts were announced on September.

🔒 Protocol & Security Risk

DeFi Defense in Action: Venus Halts $13M Account Takeover via Phishing

Earlier this month, a sophisticated phishing attack targeting Venus Protocol nearly resulted in a $13.5 million loss, but was ultimately foiled thanks to swift security intervention. The attack, attributed to North Korea-linked Lazarus Group, involved tricking a high-value user into downloading a counterfeit version of the Zoom app. Once installed, the malicious software manipulated the user into approving a harmful transaction that gave the attackers delegated control over the victim’s Venus account. With this access, the attackers began draining millions in stablecoins and wrapped assets before security alerts were triggered.

The breach was detected within minutes by security partners Hexagate and Hypernative, who promptly notified the Venus Protocol team. In response, Venus paused the protocol within 20 minutes to freeze the attacker’s movements and launched an emergency governance vote. The community unanimously approved the forced liquidation of the attacker’s wallet, allowing the stolen funds to be recovered and secured within 12 hours. A comprehensive audit followed, confirming that Venus’s core systems and front-end remained uncompromised, enabling operations to safely resume.

The incident underscored the growing threat of social engineering in DeFi, as the attack exploited human behavior rather than any flaw in Venus’s smart contracts. It also highlighted the importance of rapid response mechanisms and raised critical questions about the trade-offs between decentralization and emergency powers in governance. Following the event, users were urged to follow stronger security practices, such as using hardware wallets, managing token approvals carefully, and being wary of software downloads—especially those outside official channels.Supply-chain malware: JS package poisoning aimed at wallets—losses small but exposure wide.

Nemo Breach Exposes DeFi Risks on Sui — $2.4M Stolen

On September 8, 2025, the Nemo Protocol on the Sui blockchain suffered a major exploit resulting in the theft of approximately $2.4 million in USDC stablecoins. The attack targeted a vulnerability in a newly deployed, unaudited smart contract function meant to reduce slippage, which allowed the attacker to manipulate the protocol’s state and drain funds from its market pool. Although vault assets remained untouched, the breach caused a significant drop in Nemo’s Total Value Locked (TVL) and highlighted the ongoing risks facing decentralized finance (DeFi) systems. The attacker bridged the stolen funds from Arbitrum to Ethereum, swapping them for decentralized assets like DAI and ETH—likely to evade freezing by USDC’s issuer, Circle. The incident, which occurred during a scheduled maintenance window, was later identified as part of a broader wave of crypto thefts, with Chainalysis ranking it among the top DeFi hacks in September 2025.

The exploit underscores persistent vulnerabilities in both DeFi liquidity pools and cross-chain bridges. Common bridge-related risks include smart contract flaws, weak on-chain verification, oracle manipulation, centralization issues, and faulty wrapped token mechanisms. Pools, especially those involving complex yield strategies like Nemo’s, are also exposed to risks such as price manipulation, liquidity drain attacks, and the dangers of deploying unaudited code. To mitigate such threats, both users and developers must adopt stronger security practices—users through research, diversification, and cautious participation; and projects by prioritizing thorough audits, clear emergency procedures, and transparent communication during incidents. As the DeFi landscape continues to grow, so too must the emphasis on robust and proactive security measures.

🏛️ Policy & Regulation

GENIUS Act in Motion: Treasury Kicks Off Stablecoin Oversight Debate

The GENIUS Act introduces a regulatory framework for stablecoin issuers, and the Treasury’s recent Request for Information (RFI) on August 18 has sparked debate over key implementation issues, including reserve attestations, custodial standards, and the balance between federal and state oversight. Under the Act, all permitted stablecoin issuers (PPSIs) must back their tokens 1:1 with high-quality, liquid assets such as cash, bank deposits, or short-term U.S. Treasuries. Issuers are required to publish monthly reserve composition reports verified by a certified public accountant, and those with over $50 billion in circulating stablecoins must also submit annual audited financial statements. To protect consumers, the law sets strict custodial standards: only regulated entities may hold reserves, custodians cannot commingle funds, and customers retain property rights over their stablecoins—even in the event of a custodian’s bankruptcy.

The Act also establishes a dual regulatory model that assigns oversight based on the issuer’s size. Issuers with more than $10 billion in outstanding stablecoins fall under federal oversight by agencies like the OCC or other federal banking regulators. Smaller issuers, under the $10 billion threshold, may operate under qualifying state regimes—provided these meet standards deemed "substantially similar" by a newly created Stablecoin Certification Review Committee. This tiered structure is designed to prevent regulatory arbitrage while accommodating both federal and state supervision, though differences in state-level requirements may still pose challenges for uniform compliance across the sector.

New Senate Draft Seeks to Draw the Line Between CeFi and DeFi

On September 9, 2025, Senate Democrats released a new digital asset market structure framework aimed at defining how centralized and decentralized platforms should be regulated. The proposal distinguishes between traditional financial entities—like exchanges and custodians—and decentralized finance (DeFi) protocols, advocating different regulatory standards based on the level of control and intermediation involved. Centralized platforms serving U.S. users would be required to register under the Bank Secrecy Act, while DeFi platforms would be subject to a yet-to-be-defined but "appropriate and effective" oversight regime. A major focus of the framework is resolving the long-standing jurisdictional debate between the SEC and CFTC by clarifying whether specific tokens are securities or commodities, and by expanding the CFTC’s authority over spot markets for non-security digital assets.

This Democratic initiative follows closely on the heels of a Republican draft update to the Responsible Financial Innovation Act (RFIA), setting off a legislative "crypto sprint" toward bipartisan agreement. Key contrasts include the Republican proposal's explicit protections for DeFi developers—shielding them from certain regulatory burdens—and the Democrats' inclusion of ethics provisions banning elected officials and their families from launching or profiting from crypto projects.

While Republicans have been criticized for working closely with industry stakeholders behind closed doors, Democrats have positioned their framework as a set of negotiable principles. The path forward involves reconciling these competing Senate proposals with the House-passed CLARITY Act, with committee markups expected by the end of September. However, Democrats have urged caution against hasty policymaking, emphasizing the need for broad bipartisan consensus to advance any final legislation to President Trump’s desk.

SEC & CFTC Join Forces: Roundtable Aims to End Crypto Turf Wars

In a significant shift toward regulatory alignment, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) announced enhanced cooperation and a joint roundtable scheduled for September 29, 2025, aimed at harmonizing oversight of digital assets and complex financial products. This marks a departure from years of regulatory fragmentation, where differing interpretations—such as the SEC classifying many tokens as securities under the Howey Test and the CFTC treating assets like Bitcoin and Ether as commodities—created legal uncertainty and stifled innovation.

The upcoming roundtable will address critical issues including 24/7 market structures, event and perpetual contracts, portfolio margining, and potential innovation exemptions for DeFi. Both agencies’ leaders have described this collaboration as a "new day" for regulation, with hopes of increasing market clarity, fostering innovation within U.S. borders, and reversing the offshoring of crypto development due to regulatory ambiguity. However, key policy details remain unresolved, making the roundtable a pivotal moment for public input and industry engagement.

TradFi Gets Tokenized: RWAs Catch Attention of Allocators as Momentum Builds

The tokenization of real-world assets (RWAs) is rapidly gaining traction in traditional finance, as evidenced by Nasdaq’s recent SEC filing to enable trading of tokenized stocks and exchange-traded products, and growing institutional interest from asset managers like BlackRock and Fidelity. Nasdaq’s proposal introduces a hybrid model that allows securities to be held in either traditional or tokenized form on the same order book, aiming to harness blockchain’s efficiency—such as faster settlement—without compromising investor protections.

This move, alongside the success of tokenized funds like BlackRock’s BUIDL and Fidelity’s FDIT, signals a major milestone in integrating blockchain into mainstream finance. For institutional allocators, tokenization offers compelling advantages: enhanced liquidity through fractional ownership and secondary markets, broader investor access to high-value assets, operational efficiencies, and new collateral options for DeFi. While regulatory fragmentation and infrastructure integration remain challenges, the growing convergence of TradFi and blockchain suggests a future built around hybrid financial models—blending the oversight of traditional systems with the innovation of decentralized technologies.

📸 Market Snapshot

Market Snapshot
Bitcoin is holding at $113.5K (intra-day range: $110.9K–$114.3K), posting modest gains. Ethereum is slightly positive at $4.32K, while Solana (SOL) trades around $221. Despite the resilience in majors, the total crypto market cap briefly dipped below $4T, reflecting a cautious tone as markets await clearer macro or policy signals.

🔍 Notable Trends:

• RWA tokens saw elevated interest following fresh tokenization filings and institutional inflows.

• DeFi TVL remains stable, but security concerns linger after recent exploit attempts (e.g., Venus, Nemo).

• ETF flows have turned neutral after weeks of strong momentum, leading to range-bound price action in majors.

• Altcoin dispersion persists, with sector rotations favoring L2s and modular ecosystems over meme and micro-cap narratives.

📄 RFS DeFi Risk Dashboard Insights

Introducing the Stablecoin Governance Module: Bringing Transparency to the Backbone of Crypto

Stablecoins are the glue holding many crypto portfolios together—but how well do we really know what’s backing them? Enter the Stablecoin Governance Module, a game-changing framework that maps out issuer reserves by quality, location, and reporting frequency. Imagine breaking down stablecoin collateral—whether it’s cash, Treasuries, or other liquid assets—not just by what it is, but where it’s held and how often issuers are opening the books. This level of transparency gives regulators, investors, and DeFi enthusiasts a powerful new lens to spot risks before they snowball, track regional or asset concentration, and ensure that reserves are solid enough to handle market turmoil. In a space where trust is everything, this module could be the key to more resilient and trustworthy stablecoins.

Depeg Risk & Liquidity Stress: The Early Warning System You Didn't Know You Needed
Stablecoins may aim for price stability, but when liquidity dries up, even the most trusted tokens can wobble. That’s why a growing number of analysts and platforms are now tracking slippage bands—the price impact of trades across major stablecoins—to catch early signs of depegging events. Think of it as a volatility radar for markets that are supposed to be stable. What's more, this data is being tied to ETF flow monitors, helping market watchers connect the dots between large fund movements and sudden liquidity shifts in stablecoin pairs. In a world where real-time reaction is everything, this kind of integrated alert system could become a critical tool for avoiding the next stablecoin shock.

OpSec Heat Map: Your Protocol’s New Security Sentinel
In the fast-paced world of crypto, a single rogue delegate grant can open the door to massive exploits. That’s where the OpSec Heat Map steps in—an intelligent watchdog that spots unusual permission changes in real time and auto-pauses your protocol before things spiral out of control. But it doesn’t stop there: by enforcing hardware-key attestations, it ensures that any critical action is backed by secure, tamper-proof hardware wallets, cutting off hackers before they even get started. Think of it as your protocol’s personal bodyguard, constantly scanning for threats and ready to slam the brakes the moment something smells off. In a space where seconds count, this tool could be the difference between a minor hiccup and a headline-making breach.

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🧭 Institutional Take (1–2 Weeks)

The market outlook among institutional players is cautiously optimistic, with major cryptocurrencies expected to trade sideways to slightly higher, while altcoins continue to show mixed performance and volatility. Key risks remain on the radar, including isolated exploits and threats from software supply-chain attacks that could disrupt protocols unexpectedly. Keep an eye on upcoming catalysts that could shake things up—ongoing policy consultations like the GENIUS Act and Senate drafts, shifts in ETF flows, and new approvals for real-world asset tokenization are all poised to influence market sentiment and drive momentum.

🙇🏾‍♀️ Camryn’s Corner

Welcome to another segment of ‘Camryn’s Corner’ brought to you by your co-author and editor! Each week I will highlight my top 5 DeFi Applications, Protocols, or other news worthy subjects in the crypto and DeFi world.

This week I will be touching on security and safe practices in DeFi.

Recent headlines have reminded us just how quickly things can go sideways in DeFi, with high-profile security incidents like the $13.5 million attempted account takeover on Venus Protocol and the $2.4 million exploit on Nemo Protocol shaking investor confidence. These events highlight that even well-established projects aren’t immune to sophisticated attacks, underscoring the importance of personal security awareness for anyone navigating the DeFi landscape. Whether you’re a seasoned user or just getting started, understanding common scams and adopting strong security practices is essential to protect your assets in this fast-evolving space.

How to Stay Safe in DeFi: Common Scams and Security Tips

Diving into DeFi can feel like stepping into the Wild West—exciting opportunities everywhere but with hidden dangers lurking beneath the surface. One of the biggest threats newcomers face is phishing attacks, where hackers trick you into giving up your private keys or login details through fake websites or messages. Always double-check URLs, never share your seed phrase, and be skeptical of unsolicited links. Another common pitfall is the dreaded rug pull—where a seemingly promising project suddenly vanishes with your funds. To avoid these traps, look for projects with transparent teams, strong community backing, and audited smart contracts.

Beyond awareness, protecting your crypto assets starts with the right tools. Hardware wallets are your best defense, storing your private keys offline and out of hackers’ reach. By combining vigilant habits with secure devices, you significantly reduce the risk of losing your hard-earned crypto. Remember, in DeFi, security is a shared responsibility—staying informed and cautious keeps your journey rewarding and safe.

Quick Tips to Stay Secure in DeFi:

• Always verify website URLs and avoid clicking suspicious links.

• Use hardware wallets to keep your private keys offline.

• Revoke unnecessary token permissions regularly.

• Stick to projects with clear audits and active communities.

• Never share your seed phrase or private keys with anyone.

📋 RFS Action Checklist

1. Stablecoin Exposure Audit: In today’s fast-evolving DeFi landscape, understanding the true backing of stablecoins is more critical than ever. This audit framework maps out treasury and liquidity provider (LP) exposures, helping to differentiate between cash-like reserves—such as liquid government securities—and credit-linked reserves that carry higher risk. By stressing these categories separately, market participants can better gauge a stablecoin’s resilience during times of volatility or market stress, providing a clearer picture of potential vulnerabilities before they impact users.

2. Signer Hygiene: Security starts at the individual level. Implementing strict device isolation protocols and requiring transaction simulations before any role or delegate changes can drastically reduce the risk of unauthorized access. This means every keyholder or delegate must operate in a secure, isolated environment, and every transaction is pre-checked for anomalies, ensuring the integrity of wallet controls and minimizing the chances of phishing or internal compromise.

3. Dependency Lockdown: Software supply-chain attacks are an emerging threat in the crypto space. To counter this, protocols should adopt a Software Bill of Materials (SBOM) approach, meticulously tracking all dependencies and enforcing pinned software versions along with hash verification for wallet-adjacent code. This strategy ensures that any unexpected code changes or malicious insertions are immediately flagged, safeguarding the critical infrastructure that interacts with user funds.

4. ETF Flow Monitor: For investors and allocators, real-time data is gold. Keeping a rolling 5-day view of issuer flows on a dedicated dashboard allows traders to spot ETF flow inflections quickly, enabling smarter hedging and risk management decisions. This visibility not only helps anticipate market moves but also aids in navigating periods of heightened volatility with greater confidence.

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RFS DeFi Risk Intelligence Weekly

🔓Disclaimer: This Weekly is strictly informational—not investment or legal advice. RFS Consulting emphasizes governance, model validation, and data integrity in its risk assessment framework.