A Democrat DeFi Proposal has stalled crypto market structure talks on Capitol Hill. The leaked proposal, first reported by Politico, has caused a stir between with Democrats and Republicans who are at loggerheads over the regulation of Decentralised Finance (DeFi).
On Wednesday, Democrat staffers sent a document titled ‘Preventing Illicit Finance and Regulatory Arbitrage Through Decentralized Finance Platforms’ to their Republican counterparts, sparking immediate backlash from the crypto industry.
Democrat DeFi Proposal Sparks Industry Outcry
The document proposes broad rules for policing DeFi, categorising anyone involved with a front-end interface as an intermediary. Critics argue this approach is overly broad and threatens the ethos of DeFi. Jake Chervinsky from Variant Fund highlighted concerns over unchecked regulatory power and potential constitutional issues, contrasting sharply with a Republican draft that supports self-custody and software developers.
Stalemate on Capitol Hill
By Thursday, Democratic offices, particularly Senator Mark Warner’s, were inundated with calls from industry members decrying the proposal as unworkable. Republicans, frustrated by the Democrats’ stance, have paused negotiations until a markup date is set. Banking Committee Chairman Tim Scott (R-SC) had initially planned for a September 30th markup, but discussions are now on hold. Democrats, led by Senator Warner, insist on refining the legislation before setting a date.
The impasse raises concerns that any progress on the bill might be delayed into 2026, coinciding with midterm elections when crypto policy could be sidelined. Meanwhile, the Agriculture Committee, led by Senator Cory Booker (D-NJ), continues to work on the commodities side of the legislation, though progress remains slow.
*This article is for informational purposes only and does not constitute financial advice.*
A minimalistic but detailed illustration of Capitol Hill with abstract crypto symbols in the foreground.
