Crypto Coalition Urges Senate to Protect Developers in Market Structure Legislation
Commentary by Gage Raju-Salicki
A coalition of more than 110 blockchain builders, investors and advocacy organizations urged Senate legislators to protect software developers and non-custodial service providers in upcoming market structure legislation.
In their letter to Senate Banking and Agriculture Committee members, the coalition emphasized that developers creating and maintaining blockchain networks, and non-custodial service providers enabling users to access decentralized platforms, should not be subject to regulations designed for traditional financial intermediaries. The groups warned that, without protection, the US risks losing ground in blockchain innovation and driving open-source development abroad.
The coalition includes leading organizations, such as DeFi Education Fund, Blockchain Association, Coinbase, Kraken and Ripple, as well as state blockchain associations. They noted the House and Senate drafts of market structure legislation, including the Blockchain Regulatory Certainty Act and Keep Your Coins Act, take important steps toward recognizing the distinction between intermediated finance and decentralized networks, protecting self-custody rights and supporting peer-to-peer transactions. The coalition said that market structure legislation must:
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explicitly protect blockchain infrastructure developers and non-custodial providers from being regulated solely for creating, developing, publishing, or maintaining blockchain networks;
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ensure developers are not treated differently based on the type of software they create when they do not have custody or control over user assets;
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shield developers from misclassification or prosecution as operators of money transmitting businesses;
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include federal preemption to prevent conflicting state laws that could undermine innovation.
Commentary
Crypto advocates have long sought to protect DeFi and self-custodial activities—it's a matter of privacy, they argue.
In the wake of the Roman Storm verdict, the crypto industry seems more convinced than ever that this issue is existential, explaining that DeFi developers and protocols are inherently different from the traditional financial system, and should be treated as such under the law.
Given that the GENIUS Act did not enact any protections for DeFi, the industry's eyes are on market structure. The CLARITY Act and its cousin in the Senate—seen only in a Senate Banking draft for the time being—both carve out exceptions for DeFi protocols. The question, then, is political will. Given that the industry is united behind this and that courts have generally viewed DeFi as its own category, (e.g., the Fifth Circuit's TornadoCash decisions), perhaps the situation may not be as dire as the industry believes. Roman Storm's conviction is nevertheless forceful, and even if the Department of Justice has alluded to no further DeFi prosecutions (absent criminal intent), political winds could shift at any time. With Congress returning to session soon, we'll likely see new movement on legislation, and perhaps new efforts to protect DeFi developers and protocols.