Cointime

Download App
iOS & Android

Senate Democrats' Leaked Crypto Position Would Strangle DeFi, Industry Insiders Say

  • The industry is up in arms over language reportedly circulated by U.S. Senate Democrats describing how they'd like to approach decentralized finance.
  • The proposal essentially defines any entity making money off the front-end of DeFi platforms as needing to be regulated as a broker.
  • The CEO of the Blockchain Association said it would "effectively ban" DeFi in the U.S.

The crypto industry is recoiling from a document reportedly outlining a U.S. Senate Democratic pitch on handling decentralized finance (DeFi) as a component of the wider effort toward regulating crypto in the U.S.

The proposal — a detailed outline describing an approach to DeFi, first reported by Politico — suggests that a firm or individuals that handle customer needs on the front end of a DeFi operation should have to register with the Securities and Exchange Commission or the Commodity Futures Trading Commission and be regulated as a broker.

The language defining who would be roped into regulation as an intermediary would seem to include "everyone in crypto," according to a take posted on social media site X from Jake Chervinsky, the chief legal officer at Variant.

"Many aspects of the proposal are fundamentally broken and unworkable," he argued. "This is not a 'first offer' in a negotiation; it’s a list of demands that appear designed to kill the bill."

Summer Mersinger, who runs the Blockchain Association and was recently a commissioner at the CFTC, said the proposal "would effectively ban decentralized finance, wallet development and other applications in the United States."

"The language as written is impossible to comply with and would drive responsible development overseas," Mersinger said in a statement. "We urge our policymakers to stay at the table."

Before the Senate's crypto market structure work fell into the shadow of the ongoing negotiation to reopen the federal government, Senate Republicans and Democrats were circling each other over legislative language and seemed to be in range of making progress on a final, combined bill. But the industry was bracing itself in August for expected pushback from Democratic Senator Mark Warner, a key lawmaker on national security issues who has raised concerns about illicit finance in crypto.

This latest proposal seemingly seeks to allow the Treasury Department, markets regulators and the Federal Reserve to squeeze bad actors by letting the government agencies identify those they can hold accountable for DeFi activity, described loosely as "anyone designing, deploying, operating or profiting from a DeFi front-end." However, it holds that pure DeFi protocols that aren't making money can be defined as "sufficiently decentralized" to be outside of the regulatory perimeter.

The proposal also seeks to free software developers from legal liability for their open-source creations, as long as they don't make money from running the technology. This liability question has been among the core concerns of the DeFi space.

Meanwhile, lawmakers in the House of Representatives, where a market structure already passed with a wide margin, have been calling for the Senate to just go ahead and use their Digital Asset Market Clarity Act as a template instead of starting over.

However, Senate legislation is more dependent on bipartisan support in order to clear the usual 60-vote requirement. While the crypto work has a long list of Democratic allies, they've made it clear that there are a number of changes they're seeking in the previous Republican legislative drafts before they can jump on board.

Comments

All Comments

Recommended for you

  • SpaceX's Largest IPO Approaches, Space Stocks Surge, Momentus Up Over 24%

    On June 4, space stocks saw significant gains, with Momentus rising over 24%, Virgin Galactic up over 18%, Redwire increasing by over 17%, and York Space Systems gaining more than 7%. Boeing, GE Aerospace, and Rocket Lab also saw nearly 3% increases. In news, SpaceX disclosed in a filing submitted to the U.S. Securities and Exchange Commission (SEC) on Wednesday that it plans to set the offering price at $135 per share before officially launching the IPO roadshow, aiming to raise $75 billion. At this offering price, SpaceX's valuation would reach $1.77 trillion, making it the seventh-largest publicly traded company in the U.S., surpassing Tesla's current valuation of approximately $1.6 trillion. SpaceX plans to officially list on the Nasdaq stock exchange on June 12. In its lengthy prospectus, SpaceX anchors its total addressable market (TAM) at an unprecedented $28.5 trillion.

  • SpaceX Promotes IPO to Retail Investors with 17-Minute Video, Outlining Future Vision and Ambitious Goals

    On June 4, SpaceX launched an IPO promotion for retail investors through a video early Thursday morning. In this 17-minute video, Chief Financial Officer Bret Johnsen connected the company's rocket, satellite, and artificial intelligence businesses. This presentation is part of the company's efforts, led by Elon Musk, to attract ordinary investors globally. Media reports have indicated that these buyers are a key component of SpaceX's IPO strategy, with up to 30% of the $75 billion issuance allocated to such investors. Johnsen was the only person featured in the video, where he introduced himself as the company's first and only CFO. The video is available on the company's website, spacexipo.com, which prominently encourages visitors to open brokerage accounts. Johnsen stated, 'Elon founded SpaceX with the goal of changing humanity and making us a multi-planetary species. It is incredibly exciting that we have already been able to expand this vision through the Starlink constellation and our AI solutions.' The roadshow outlined several future goals but did not specify timelines for achieving them, including increasing gross margins from last year's 49% to around 70% and achieving a net profit margin of approximately 45%, compared to last year's negative 26%. The company also outlined grand ambitions in the video, including sending data centers into space. The video further detailed its operations, including reusable rockets and the Starlink satellite system providing broadband internet access to Earth.

  • BTC Surpasses $64,000

    Market data shows that BTC has surpassed $64,000, currently priced at $64,033.43, with a 24-hour decline of 4.37%. The market is experiencing significant volatility, so please ensure proper risk management.

  • Nasdaq Golden Dragon China Index Rises Over 0.5%

    On June 4, the Nasdaq Golden Dragon China Index rose over 0.5%. Daqo New Energy increased by 6.94%, Niu Technologies rose by 6.25%, Tencent Music grew by 3.99%, Yikatong Technology climbed by 3.76%, and Bilibili saw an increase of 3.47%.

  • Philadelphia Semiconductor Index Falls Over 4%, Broadcom Drops Over 14% Leading the Sector

    On June 4, the Philadelphia Semiconductor Index fell over 4%, with Broadcom experiencing a significant drop of over 14%, leading the decline in the U.S. semiconductor sector. Arm and Micron Technology both fell over 6%, while AMD and Marvell Technology dropped over 5%. ON Semiconductor fell over 4%, and Qualcomm, Applied Materials, and GlobalFoundries each declined over 3%. Intel, Analog Devices, and ASML saw declines of over 2%. In terms of news, Broadcom reported total revenue of $22.187 billion for Q2 of fiscal year 2026, a year-on-year increase of 48%, with AI revenue reaching $10.8 billion, up 145%, both exceeding market expectations. Looking ahead to the third fiscal quarter, the company expects AI revenue to reach $16 billion, a quarter-on-quarter increase of 48% and a year-on-year increase of 210%. Citigroup analysts pointed out that the $16 billion AI revenue guidance is below their expected $17.5 billion and also below the market consensus expectation of $16.3 billion. Meanwhile, Broadcom's CEO merely reaffirmed the existing target of 'over $100 billion' in AI revenue for fiscal year 2027 without any enhancements, which directly triggered market disappointment.

  • Micron Technology Stock Price Falls Below $1000

    On June 4, Micron Technology's stock price dropped by 7.61%, closing at $997.40 per share, with a total market capitalization of $1.12 trillion.

  • Nasdaq Opens Over 1% Lower, Broadcom Drops Over 14% After Earnings

    On June 4, U.S. stock markets opened with mixed results. The Nasdaq fell by 1.02%, the S&P 500 dropped by 0.34%, while the Dow Jones rose by 0.97%. Broadcom saw a significant drop of over 14%, with its third-quarter AI revenue guidance set at $16 billion, a 210% year-on-year increase, which still fell short of market expectations. CrowdStrike also declined by over 9%, as its second-quarter earnings guidance did not 'impress the market,' with analysts noting that recent stock prices have already fully reflected the positive outlook.

  • Spot Silver Reaches $75/Ounce, Up 3.16% for the Day

    Spot silver has reached $75 per ounce, increasing by 3.16% during the day.

  • Blackstone's Flagship Private Credit Fund Limits Investor Redemptions for the First Time

    On June 4, Blackstone Group (BX.N) implemented restrictions on redemption requests for its flagship private credit fund after investors sought to redeem 10% of their shares. This marks the fund's first limitation on redemption applications, making it the latest fund to tighten redemption limits amid a wave of investor withdrawals. According to documents submitted on Thursday, the $79 billion Blackstone private credit fund has informed shareholders that it will only fulfill 5% of redemption requests. In the previous quarter, the fund allowed investors to redeem a record 7.9% of shares, aided by executives using their own funds to assist with financing. Jim Zelter, Co-President of Apollo Global Management, stated that following the previous redemption restrictions, investors are intensifying their efforts to reclaim funds, suggesting that there may be more 'turmoil' in the non-traded BDC (business development company) sector.

  • U.S. Initial Jobless Claims for Week Ending May 30 at 225,000

    The number of initial jobless claims in the U.S. for the week ending May 30 was 225,000, compared to an expectation of 213,000. The previous value was revised from 215,000 to 212,000.