Crypto crowd could still walk away from U.S. market structure bill if DeFi needs unmet

If the software developers underpinning decentralized finance (DeFi) aren’t sufficiently protected in the next draft of the crypto regulatory bill set to emerge from the U.S. Senate, the industry may still be pressed to oppose the legislation it’s spent years advocating for.

At this stage, it’s the traditional financial sector — including securities industry group SIFMA — that are most aggressively seeking to push back on the DeFi sector’s asks, according to industry leaders. That’s coming at a time when the two relevant Senate committees are hashing out plans to vote on the crypto market structure bill next week — a significant step toward final Senate consideration of the industry’s marquee legislation.

“We are hopeful that what ends up in the bill will still protect software developers,” said DeFi Education Fund Executive Director Amanda Tuminelli, in an interview with CoinDesk. She said her group has had the chance to “work productively” with Senate staff and SIFMA in meetings, but some points remain uncertain. “I do have concerns that those in traditional finance who are at the table are just not on the same page as us when it comes to promoting innovation and protecting innovation,” Tuminelli said.

SIFMA didn’t immediately respond to a request for comment. The organization hasn’t made substantial public arguments about its views on the crypto space, apart from a recent position on tokenized securities.

In August, a unified crypto industry signed a letter to senators saying it wouldn’t be able to support a market structure bill that didn’t protect developers. The document was signed by Coinbase, Kraken, Ripple, a16z, Uniswap Labs and more than a hundred other crypto businesses and organizations, many of them on the more centralized end of the sector.

DeFi insiders have several fundamental demands that they consider make-or-break for survival of their technology, and this is where their eyes will focus when legislative text emerges in the coming hours or days:

• Developer Protections: The protections for the creators of DeFi software that had previously been offered up in earlier drafts of the Senate’s bill and in the House of Representatives’ Digital Asset Market Clarity Act seem to remain in flux. If people who write code are held legally liable for how others use their software creations, the DeFi movement collapses, its advocates say. Tuminelli said her group will be “making sure the developer protections are robust and comprehensive, meaning that software developers who don’t act as intermediaries are not treated like intermediaries for the purpose of the securities laws and commodities laws.”
• Self Custody: The ability for people to hold their own digital assets is fundamental, the industry has long argued. The argument had previously landed with lawmakers, but resistance developed from traditional financial firms on whether crypto businesses can build self-custody tools for their own customers without running afoul of securities regulations. After the first 2026 negotiation of senators kicked off this week, a document emerged that showed the compromises that have been made between the parties during these talks and also the points that remain open. Self-custody was among those open points, according to the internal document. If the shield doesn’t remain, “that is a red line for us,” Tuminelli said.
• Money Transmitters: A House bill from crypto fan Republican House Whip Tom Emmer, the Blockchain Regulatory Certainty Act, clarified that crypto developers and service providers who don’t hold and control customers’ money are not money transmitters — a regulatory term for firms that handle the movement of funds between people, such as PayPal and Venmo. Emmer’s bill was adopted as a section by the Senate, and the DeFi industry would like to keep it that way, though this item is also still on the to-do list of negotiators. If developers are treated as money-services businesses in this way, they’d be directly subjected to the Bank Secrecy Act that applies stringent demands to prevent money laundering.
• Illicit Finance: There’s a section expected to be added to the bill to answer Democrats’ concern about cryptocurrency use in illicit finance to enable money laundering, ransomware and the funding of criminal and terrorist organizations. One concern of the DeFi insiders is that this section will give the U.S. Treasury Department power to build lists of banned protocols or developers. And again, if it slaps the BSA laws on developers, it’s a compliance impossibility, because developers don’t collect customer information required for BSA reporting.

Whether or not the industry will be tested on it’s DeFi support will depend on the language that emerges soon. Though Republicans are racing ahead toward committee voting next week, to the frustration of Democratic negotiators, the talks continue. One of the Republican negotiators, Senator Cynthia Lummis, posted Friday on social media a picture of what appears to be the first page of a working draft of the Responsible Financial Innovation Act.

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