2025 was a turning point for crypto in America. Against the backdrop of the GENIUS Act being signed into law and the Senate Banking Committee’s draft digital asset market structure legislation featuring the strongest protections for software developers to date, crypto’s momentum continued to build. At DeFi Education Fund (DEF), we notched critical policy wins in legislation, federal rulemaking, and in the courts. 

It is important to remember that we still have critical work to do to solidify America’s place as the leader in crypto innovation and DeFi development. Developers of noncustodial, peer-to-peer software still need strong legal protections, and DEF will continue this fight in 2026. 

This blog breaks down the shifts in Washington, outlining the most consequential crypto policy developments in the U.S. in 2025. 

Kicking-Off The First Pro-Crypto U.S. Government

Early in his term, President Trump signed an Executive Order (EO) entitled “Strengthening American Leadership in Digital Financial Technology.” The EO stated that the Trump Administration would protect and promote the “ability to develop and deploy software, to participate in mining and validating, to transact with other persons without unlawful censorship, and to maintain self-custody of digital assets.” The EO also directed federal agencies to deliver a report on digital assets and policy recommendations, ultimately leading to the President’s Working Group Report on Digital Assets – a report that carried significant implications for DeFi and even included contributions from DEF.

2025 was the most pro-crypto government to date. In 2025, we saw the most bipartisan, pro-crypto Congress ever sworn in. Congress introduced and passed legislation that protects self-custody, software developers, and permissionless blockchain networks. 

In July, the House of Representatives passed the Digital Asset Market Clarity Act, a digital asset market structure bill, and the Anti-CBDC Surveillance State Act. In May, members on both sides of the aisle introduced the Blockchain Regulatory Certainty Act, which protects noncustodial software developers from being inappropriately treated as financial institutions under the Bank Secrecy Act, and was later included in the Clarity Act and the Senate Banking Committee’s draft digital asset market structure legislation. Additionally, Senators Ted Budd (R-NC) and Mike Lee (R-UT) introduced the Keep Your Coins Act to protect self-custody for all U.S. persons, which was included in the Senate Banking Committee’s market structure draft. 

Congress and the Administration formally recognized the difference between DeFi and intermediated finance by passing the Bipartisan IRS Broker CRA Resolution. In April, President Trump signed into law House Joint Resolution 25, blocking a DeFi-focused portion of the Treasury Department’s Internal Revenue Service (IRS) Broker Rule that would have acted as a de facto ban on DeFi in America by forcing intermediaries where none exist. The move marked the first time U.S. law formally recognized the true noncustodial and intermediary-less nature of DeFi technology. 

In July of 2025, the GENIUS Act was signed into law, creating a framework for stablecoin issuers and the first tailored regulatory structure for digital assets in U.S. history. DEF is proud of the role we played advocating for DeFi during the legislative process in GENIUS. DEF ensured that key definitions for technology were clear and appropriately tailored, and that the law did not encroach on self-custody or users’ ability to self-direct transactions on blockchain networks.

These legislative victories show historic momentum in protecting developers, DeFi, peer-to-peer transactions, and Americans’ right to self-custody their own assets.  

Ending Regulation-by-Enforcement

Compared to the prior administration, the Securities and Exchange Commission (SEC) opened 2025 with a significantly more productive and reasoned approach to crypto regulation, starting with the launch of the SEC Crypto Task Force, led by Commissioner Hester Peirce. 

Under the leadership of then Acting-Chair Mark Uyeda, the SEC dropped dozens of harmful enforcement actions against crypto innovators. Notably, several were dismissed with prejudice, meaning the lawsuit cannot be brought again. The SEC also dropped its proposed revisions to the definition of “exchange,” which would have misclassified DeFi technology as an intermediary-based trading system.

After Chairman Paul Atkins was confirmed by the Senate and sworn in, the SEC rolled out a positive and ambitious rulemaking agenda for crypto and indicated it would use its exemptive authority to promote innovation. This year, DEF submitted four proposals to the Crypto Task Force, covering safe harbors for tokens, DeFi protocols, and front-ends, and guidance on the treatment of DAOs. 

Both Chair Atkins and Commodity Futures Trading Commission (CFTC) Acting Chairman Caroline Pham jointly announced their intention to establish a DeFi innovation safe harbor, providing regulatory clarity and fostering responsible growth in DeFi markets. Soon after, DEF submitted a comment letter to the CFTC in November, urging the CFTC to continue pursuing a principles-based, tech-neutral approach that creates space for DeFi and digital market infrastructure. 

In November, SEC Chairman Atkins gave a landmark speech outlining Project Crypto, a plan to develop a clear crypto token taxonomy with the recognition that most tokens themselves are not securities. 

2026 is likely to be a year of crypto-related rulemakings, and DEF will be there to make sure proposed rulemakings do not improperly encroach on DeFi technology, users, or developers. 

Tornado Cash Sanctions Dropped

For developers, uncertainty about the misapplication of sanctions remains. At the Treasury Department, the Office of Foreign Assets Control (OFAC) dropped its sanctions  against Tornado Cash in its “discretion” and after a Fifth Circuit Court of Appeals ruling that the sanctions were improperly issued. On March 21, 2025, the OFAC officially announced the delisting of the Tornado Cash front-end website and protocol smart contracts from its Specially Designated Nationals (SDN) and Blocked Persons List, following years of litigation on the issue. However, OFAC did not delist developer Roman Semenov. While this complies with the Fifth Circuit’s ruling, it is possible OFAC could reissue the sanctions under a different theory. 

Addressing “Regulation-by-Prosecution” Under Section 1960

The Department of Justice’s misapplication of criminal law Section 1960 to developers of noncustodial software remains the biggest threat to software development in the United States. DEF’s top policy priority remains protecting developers from the misapplication of 18 U.S.C. § 1960, the federal criminal statute proscribing unlicensed money transmitting businesses under the Bank Secrecy Act. The Southern District of New York’s novel reinterpretation of Section 1960 to developers of noncustodial blockchain software poses a risk to American crypto industry development. 

In April, the Deputy Attorney General (DAG) of the Department of Justice (DOJ) Todd Blanche issued a memo entitled “Ending Regulation by Prosecution.” In this memo, DAG said that the era of regulation by prosecution is over, emphasizing that “The Department of Justice is not a digital assets regulator.” The DAG memo instructed prosecutors not to “charge regulatory violations in cases involving digital assets.” The memo specifically stated that any exceptions to this policy must be approved by the DAG, which gives this policy some teeth for future prosecutions under this DAG. 

In August of 2025, the Acting Assistant Attorney General (AAG) of the DOJ Criminal Division Matt Galleoti delivered a headline-making speech on Section 1960 at the inaugural American Innovation Project Summit in Jackson Hole, Wyoming. AAG Galeotti reaffirmed that the DOJ will not “use federal criminal statutes to fashion a new regulatory regime over the digital assets industry,” nor “leave innovators guessing as to what could lead to criminal prosecution.” The remarks acknowledged that the DOJ’s position on Section 1960 had been unclear and that in order to provide developers with fair notice of how the DOJ would apply the law going forward, the DOJ will not approve charges in cases where developers lack custody and control over user assets, a meaningful step forward. 

DEF continues to support Roman Storm, who was convicted at trial on one charge of  “conspiracy to operate an unlicensed money transmitting business” under 18 U.S.C. § 1960(b)(1)(C). However, the jury hung on the other two charges at issue – conspiracy to launder money and violate sanctions – signaling that the SDNY’s evidence at trial was not convincing. 

For America to become the crypto capital of the world, developers of noncustodial, peer-to-peer software need a lasting fix. Custody and control are necessary elements to charges of “money transmitting” under Section 1960. In 2026, DEF will continue to advocate for appropriate treatment of software developers to regulators, in Congress and in the courts. 

Securing Developer Protections in Market Structure Legislation

2025 represented a breakthrough for software developer protections: the Senate Banking Committee’s market structure draft introduced the most robust protections for software developers ever included in a discussion draft. 

DEF led the largest coalition letter in crypto history, urging the Senate to include critical developer protections in its market structure bill. Our coalition pushes the Senate to ensure that legislation appropriately differentiates between intermediaries and noncustodial software developers, and advocates for users’ right to self-custody their own assets and conduct peer-to-peer transactions. We called on Congress to include robust developer protections in the market structure bill, including the Keep Your Coins Act and Blockchain Regulatory Certainty Act, as well as a fix to Section 1960.

We were successful. The Senate’s draft bill included the strongest federal protections for software developers and self-custody that we have ever seen. Title V, “Protecting Software Developers and Software Innovation” included the Blockchain Regulatory Certainty Act (Section 505), which protects noncustodial software developers from misclassification under the BSA, and the Keep Your Coins Act (Section 506), which protects users’ right to self-custody their assets. 

In Section 501, “Protecting Software Developers”, the bill protects software developers from securities regulations meant for traditional financial institutions when they create and provide noncustodial technological infrastructure, a critical recognition of the technical differences between DeFi and traditional intermediaries. Further, the updated bill includes federal preemption for these protections, solidifying a single federal framework and preventing a patchwork of state laws for software development. The section also includes an amendment to Section 1960, making it clear that a person must have control over assets to be defined as a money transmitting business operator, and extending the applicability of this section retroactively. 

While the Senate Banking Committee draft was a landmark success for developers, educating policymakers and regulators about blockchain and DeFi technology remains a pressing focus for 2026.  

GENIUS Act Rulemakings and the Path Ahead  

The Treasury Department moved swiftly to begin implementing the GENIUS Act after its passage in July. DEF submitted three comment letters responding to Treasury’s Request for Comment on Innovative Methods to Detect Illicit Activity in Digital Assets, including one DEF-only submission and one coalition submission with Paradigm and Solana Policy Institute. 

DEF and Solana Policy Institute also submitted a response to the GENIUS Act Advanced Notice of Proposed Rulemaking. Our response lays out three guiding principles to ensure that the GENIUS Act is implemented in a way that provides clarity, incentivizes U.S. innovation, and protects the technology: 1) regulatory obligations must center on control; 2) GENIUS Act implementation must focus on function over form; and 3) rules must align with existing statutory text and Financial Crimes Enforcement Network (FinCEN) guidance. 

As the GENIUS Act is implemented through rulemaking, 2026 will be a critical year to ensure that DeFi technology is treated properly under the framework. 

Legacy Intermediaries Challenge Crypto Policy 

Amid all of the progress crypto has made in the policy arena in 2025, some legacy incumbents have started to throw up obstacles in Washington. Legacy financial intermediaries, including big banks and securities registrants, launched coordinated campaigns to challenge crypto in Congress and in front of federal regulators, including on issues like rewards on payment stablecoins, GENIUS Act rulemakings, and protections for software developers. While many of these threats are based on a fundamental misunderstanding of crypto and DeFi technology, they must be taken seriously.

In December of 2025, Citadel Securities sent a letter to the SEC on “Tokenized U.S. Equity Securities & DeFi Trading Protocols.” In the letter, Citadel encouraged the SEC to regulate DeFi technology, developers, and others, as traditional SEC-registered intermediaries. Citadel alleged that everything from validators to self-custody wallet providers to “smart contract developers” are “intermediaries” like securities brokers. 

DEF, alongside a group of organizations Citadel miscited in their letter, wrote a response to correct Citadel’s mischaracterizations of our own submissions to the SEC and misleading arguments about DeFi. Citadel’s letter rested on a flawed analysis of the securities laws that attempted to extend SEC registration requirements to essentially any person with even the most tangential connection to a DeFi transaction. 

Crypto’s opponents have also ramped up advocacy in Congress. During the late stages of the Digital Asset Market Clarity Act and prior to its passage out of the House in July, a dominant force in centralized futures trading was able to successfully lobby to narrow protections for developers of certain DeFi derivatives protocols. Originally, the developer protections in the bill offered broad protections for software developers building DeFi trading protocols, regardless of the type of financial product involved. But in revised drafts of the House Rules Committee text, those safeguards were trimmed back to cover only activities involving spot transactions (trades settled immediately in the spot market) as opposed to futures contracts, which are agreements to buy or sell an asset at a set price on a future date. This action essentially gutted certain protections for DeFi derivatives trading protocols, a burgeoning sector of the crypto industry. 

While the Senate Banking Committee market structure discussion draft contained robust protections for developers, the crypto industry must stay vigilant and focused for the path ahead in legislation and rulemaking. 

The Fight That Lies Ahead

As we move into 2026, it is more important than ever to remember the purpose of decentralized, permissionless technologies: individual liberty and autonomy. As we design the rules for the next era of crypto innovation, we can’t afford to recreate the failures of the systems we’re trying to evolve beyond. Satoshi didn’t invent Bitcoin so we could copy-paste Wall Street gatekeepers into Web3 and call it “compliance.” Bitcoin and DeFi were born as a response to the perils of traditional finance. We must continue to protect self-custody, peer-to-peer transactions, and permissionless DeFi systems wherever possible. Policymaking should move us forward, not backward.

As several DEF Board Members have explained on X, the promise of DeFi is that it allows for open, intermediary-less access to finance for everyone. We must not compromise on these core values. This means continuing to constructively engage with policymakers and regulators, but it also means staying true and unyielding to the values inherent in this technology. We must do the policy work to ensure that people can continue to safely build, use, and invest in this technology around the globe. 

As we move into 2026, we will hold the line where it matters. This means making sure that DeFi technology is treated properly, DeFi developers are protected, DeFi remains permissionless, and users’ right to self-custody remains protected. DEF is committed to these principles and will continue to stand firmly in them as we press forward in legislation and rulemaking in 2026. 

The following post was authored by DEF’s Policy Lead Gavin Zavatone.

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