As discussions continue in the US Senate over the Clarity Act, a bill regulating the cryptocurrency market, more than 100 proposed amendments introduced by members of the Senate Banking Committee have sparked new debate.
According to information shared by journalist Eleanor Terrett, the DeFi Education Fund (DEF), an advocate for decentralized finance, argued that the changes proposed by some Democratic senators pose serious risks to DeFi technology, users and developers.
DEF described the proposed changes as “anti-DeFi” and urged its supporters to pressure senators ahead of the Senate vote. According to the organization, the proposed changes focus on the Blockchain Regulatory surety Act (BRCA), protections for software developers without controls, DeFi front-end interfaces, tokenization regulations, and anti-money laundering (AML) obligations for developers and digital asset companies.
According to the statement, the proposed changes were introduced by Democratic Senators Catherine Cortez Masto, Andy Kim, Chris Van Hollen, Elizabeth Warren and Jack Reed.
Among the areas that DEF specifically opposed were rewriting the BRCA to make it actionable against developers, removing protections for “developers without control,” and the inclusion of digital asset companies within the definition of “financial institutions.” Some of the proposed changes also include the expansion of the Bank Secrecy Act (BSA) and AML obligations for DeFi platforms.
Some of the proposals, most notably that of Senator Chris Van Hollen, provide for criminal liability of software developers who develop or publish DeFi protocols – which are thought to “facilitate” criminal activity. The DEF states that this approach could directly target open-source software development activities.
Senator Elizabeth Warren’s proposed changes aim to create specific AML and anti-terrorism financing obligations for certain DeFi companies and interfaces. Other notable provisions include closing “gaps” in the tokenization space and defining digital asset companies as financial institutions.
Another notable proposal came from Senator Jack Reed. According to DEF, this change could pave the way for sanctions on smart contracts, regardless of whether they operate autonomously or are proprietary. The organization believes this could put significant pressure on DeFi developers in the US.
Changes to the Clarity Act are expected to be discussed at a hearing before the Senate Banking Committee.
*This is not investment advice.