As Senators race towards market structure vote, DeFi devs remain a sticking point

Protection for DeFi developers is one of several issues that have divided US Senators racing toward a markup of crypto market structure legislation, according to a source familiar with the negotiations.

That markup is currently scheduled for January 15, Senator Tim Scott, a Republican from South Carolina and chair of the Senate’s banking committee, told Breitbart in an exclusive interview.

“Next Thursday, we’ll have a vote on market structure,” he told the publication. “The advancement of President Trump’s affordability agenda starts with a markup.”

On Thursday, representatives from dozens of crypto companies travelled to Washington, DC to lobby senators as they attempt to hammer out the final details of a bipartisan framework for crypto legislation that President Donald Trump demanded shortly after he returned to the White House last year.

A market structure bill would end a regulatory turf war between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Both agencies attempted to claim jurisdiction over crypto markets during the Biden administration.

Provisions in a version of the bill released by the Senate Banking Committee would give the SEC oversight of so-called ancillary assets, digital assets that don’t confer the traditional financial rights of company stock. That bill would allow these tokens to fall under the CFTC’s jurisdiction once their distribution is sufficiently decentralised.

Republican senators recently made a “closing offer” to their Democrat counterparts, according to a document obtained by Politico. That offer includes new language regarding investor protections and illicit finance.

But unresolved issues include “ethics” — Democrats have repeatedly demanded that new legislation bar Trump and his family members from launching or running crypto businesses — as well as a provision in federal law that prosecutors have used to target crypto developers such as Tornado Cash co-founder Roman Storm.

“We’re relatively close,” the source told DL News. “There’s a couple of outstanding issues around software developer protections [and] self custody.”

The Blockchain Regulatory Certainty Act

Prosecutors have charged Storm and other crypto developers with unlicensed money transmission for creating — and allegedly operating — crypto mixers such as Tornado Cash and Samourai Wallet.

DeFi proponents argue that prosecutors’ legal theory threatens the very premise of decentralised finance, in which self-executing software enables peer-to-peer crypto transactions.

The Department of Justice has tried to limit prosecutors’ use of the money transmission law in charging crypto developers. Last April, it issued a short memo stating it no longer intends to pursue the developers of crypto mixers “for the acts of their end users or unwitting violations of regulations.”

That did not stop prosecutors from taking Storm to trial, where a jury found him guilty of violating the money transmission law.

Separately, the developers of the Samourai Wallet pleaded guilty to violating that law. They were sentenced to five years in prison.

The relevant statute is among several issues that Senate Republicans listed for discussion at a Tuesday meeting. So was the Blockchain Regulatory Certainty Act, a bill that would codify that crypto developers are not money transmitters.

It was not immediately clear whether any progress had been made on the issues as of Thursday afternoon.

Representatives for several senators involved in market structure negotiations did not respond to DL News’ requests for comment.

Stablecoin yield

There are even cracks within Republican ranks, according to Punchbowl News.

Republican Senators John Kennedy of Louisiana and Thom Tillis of North Carolina are reportedly siding with the bank lobby in a raging debate over stablecoin yields. Kennedy and Tillis did not return requests for comment.

In a Monday letter to Senators, the American Bankers Association said some stablecoin issuers have “exploited a perceived loophole” in last year’s stablecoin law, the Genius Act, by offering customers “rewards” on their stablecoin holdings.

Those rewards are often far more lucrative than the meagre interest rates that bank depositors typically earn on their savings.

Turning a blind eye to stablecoin rewards could cause banks to lose billions in customers’ deposits — money they lend to businesses and would-be homeowners, which fuels the US economy, the ABA argued.

Crypto companies, in turn, have cited recent research from a Cornell University professor that found interest-bearing stablecoins pose little threat to bank deposits.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.