A new wave of discontent has erupted in the cryptocurrency sector following the emergence of a document attributed to US Senate Democrats. The document, published by Politico, outlines possible approaches to regulating decentralized finance (DeFi) and has raised concerns that its implementation could paralyze the industry’s development in the country.
Senate Democrats Face Criticism Over DeFi Regulation Proposals
According to the proposal, any company or individual generating income from the user interface of a DeFi platform would be required to register with the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) and operate under their oversight as a broker.
Many in the industry consider this formulation overly broad. Jake Chervinsky, chief legal officer at investment fund Variant, noted that the document “gives the impression not of a starting point for discussion, but of a set of requirements that could effectively stall the bill.”
Former CFTC Commissioner and current head of the Blockchain Association, Summer Mersinger, also stated that the proposed version “makes it virtually impossible for decentralized finance, wallet development, and other crypto products to exist in the US.” According to her, such regulations are fundamentally impossible to enforce, and their adoption would push innovations overseas.
Work on a common framework for crypto market regulation in the Senate has slowed due to budget disputes, although Democrats and Republicans had previously reportedly come close to a compromise. However, disagreements have recently intensified again, particularly due to Senator Mark Warner’s concerns about the risks of illicit financing through the crypto sector.
The authors of the document claim their goal is to give financial regulators and the Federal Reserve more tools to combat unscrupulous market participants. At the same time, they allow for the possibility that “pure” DeFi protocols, which generate no revenue and are highly decentralized, could be exempt from direct regulation. Software developers who do not profit from their open-source solutions would also not be legally liable.
While the House of Representatives has already advanced its own digital asset market transparency bill, the Senate initiative’s fate remains uncertain. Passing it would require bipartisan support, which observers say will be difficult: Democrats are demanding a number of fundamental changes before agreeing to a compromise with Republicans.
Andre Cronje, known for his projects Yearn and Sonic, is back with a new, ambitious project: Flying Tulip. The startup raised $200 million in a seed round (SAFT) with participation from leading venture capitalists, including Brevan Howard Digital, DWF Labs, FalconX, Republic Digital, and others. The market capitalization of the FT token is estimated at $1 billion (FDV).
