The crypto world is buzzing about the Digital Asset Market Clarity Act, but not everyone is celebrating. A last-minute deal to win Democratic votes is causing concern, especially for decentralized finance, or DeFi. The bill, which recently passed a Senate Banking Committee hearing, now includes language that might expand regulation to areas the DeFi sector thought were safe.
One Step Forward, One Step Back
The Clarity Act is a major piece of legislation. It aims to give the U.S. rules for digital assets. During a rushed hearing last week, two Democrats joined Republicans to push it forward. This was seen as a big win. But the price of that victory might be a change to how the bill treats DeFi platforms.
Earlier versions of the bill protected what are called non-controlling developers. These are the people who write the code for things like decentralized platforms and crypto wallets but don’t run them. The new version could let regulators label these developers as “securities intermediaries” if they argue the developers have too much control. The wording is broad. It might cover anyone acting under an “agreement, arrangement, or understanding” to control a protocol.
Protection Preserved
The DeFi sector did get some good news. The Blockchain Regulatory Certainty Act, or BRCA, survived the negotiation. This law generally protects software developers who do not control people’s money from being treated as money transmitters. Senator Cynthia Lummis, a key supporter, said preserving the BRCA was a top priority and that they succeeded. But her office did not directly address the new worry about the broader definition of control.
One industry insider, who asked not to be named, said the new language could be stretched. For instance, people who hold governance tokens might be seen as having an “understanding” to vote together. This could make them targets for regulation, even if they don’t control any user funds. The fear is that the change gives the SEC and other agencies more power, which might be used differently under future leadership.
The Bipartisan Deal
The compromise was part of a package of changes that won support from Democratic Senators Angela Alsobrooks and Ruben Gallego. Senator Gallego said his vote was to keep the conversation going, not a final guarantee. The bill also picked up other amendments, including one from Senator Mike Rounds to create a regulatory “sandbox” for AI in finance.
Despite the progress, the Clarity Act is not law yet. It must now merge with a similar bill from the Agriculture Committee. Then it goes to the full Senate. A big hurdle remains: a Democratic provision to limit senior officials from owning crypto, which targets President Trump’s industry ties. So, the drama is not over. The next steps will determine if the final bill is a win for the entire crypto industry or just a partial one.
