With a markup of the Digital Asset Market Clarity Act (CLARITY) in the US Senate Banking Committee postponed indefinitely, leaders in decentralized finance are using the delay to press lawmakers on concerns with the bill.
Before Republican leaders on the Banking Committee moved late Wednesday to postpone the markup, crypto industry groups had raised concerns about provisions related to tokenized equities, stablecoin rewards and their potential impact on DeFi platforms. The DeFi Education Fund said on Wednesday that some proposed amendments could “seriously harm DeFi technology and/or make market structure legislation worse for software developers.”
Crypto venture capital companies said the legislation would need revisions to address concerns around DeFi and developer protections.
Alexander Grieve, vice president of government affairs at crypto investment company Paradigm, said the highest priority was protecting developers and DeFi, adding there needed to be “significant edits” to the bill. Jake Chervinsky, chief legal officer of Variant, said on Thursday that his “top concern” was DeFi, noting that the bill fell short of standards.
“The last draft leaves ambiguity about whether all sorts of developers and infrastructure providers could be forced to KYC users, register with SEC, or comply with other rules that don’t fit DeFi,” Chervinsky said on X.
The bill had been scheduled for markup after months of delays tied to lawmakers’ debates over decentralized finance, potential conflicts of interest and stablecoin provisions. However, Tim Scott, chair of the US Senate Banking Committee, announced a “brief pause” after Brian Armstrong, the CEO of Coinbase, said on X that the exchange could not support the bill as written.
What’s the DeFi fight in the bill about?
In contrast to banks lobbying for CLARITY to ban interest-bearing stablecoins, many industry advocates, including Armstrong, said the current version of the bill would restrict DeFi platforms’ activities, potentially moving companies outside of the US.
“I feel confident that we can get some of the DeFi issues resolved,” Cody Carbone, CEO of crypto advocacy organization The Digital Chamber, told Cointelegraph. “I think right now some of the [focus is] on narrowing certain definitions. But I do feel confident that over the next two weeks or at least leading up to the next markup, we can get to a good place with DeFi.”
“[DeFi and crypto developers] do not really care about the yield fight,” said Todd Phillips, an assistant professor of law in the Robinson College of Business at Georgia State University, in a Friday X post. “They care about having a robust market structure that allows crypto markets to grow, not whether customers keep their funds in banks or stablecoins, as what matters is their willingness to invest in new tokens.”
Some Senate Democrats have reportedly raised concerns about the draft bill allowing DeFi platforms to facilitate illicit transactions, pushing for restrictions in amendments, including those that the DeFi Education Fund flagged.
As of Friday, no new date for the markup had been scheduled.