DeFi Debrief

Week of September 15: Market Structure Draft from Senate Banking; New SEC Rulemaking Agenda; HFSC Hearing

Senate Banking Committee Releases Draft Digital Asset Market Structure Legislation

On September 5, 2025, the Senate Banking Committee released an updated discussion draft of digital asset market structure legislation entitled, “The Responsible Financial Innovation Act of 2025,” which would establish a regulatory framework for digital assets in the United States.

The updated draft includes the strongest protections language for software developers and self-custody to-date. Title V, “Protecting Software Developers and Software Innovation,” includes the Blockchain Regulatory Certainty Act (Section 505) and the Keep Your Coins Act (Section 506). In Section 501, "Protecting Software Developers", the updated bill also recognizes that software developers should not be obligated to comply with regulations meant for traditional financial institutions on the basis of creating and providing noncustodial technological infrastructure. This is a critical recognition of the technical differences between decentralized finance (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.

Notably, the updated bill includes an amendment to Section 1960 (the criminal code provision related to unlicensed money transmission), 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. With this clarification, software developers would not need to fear criminal prosecution based on misapplication of a criminal statute when they do not have custody or control over user assets.

If you’re reading this newsletter, you likely know that fixing Section 1960 is DEF’s #1 policy priority, and we’ve been actively advocating for greater software developer protections (as reflected in our recent coalition letter to the Senate joined by 115+ signatories).

Following the release of the updated bill, on September 9, 2025, twelve Senate Democrats released a detailed framework for market structure legislation, laying out seven key pillars they believe market structure legislation should include. This is a strong signal that digital asset market structure is a bipartisan legislative priority.

DEF’s Executive Director and Chief Legal Officer, Amanda Tuminelli, gave an early perspective of the Senate’s draft bill here, and shared the following statement on the framework from Senate Democrats:

DEF deeply appreciates the hard work of Congressional leaders and staff to provide the crypto industry with clearer rules, and for their inclusion of critical protections for software developers. As a next step, the updated bill will have to be formally introduced, marked up and voted on by the Senate Banking Committee, and reconciled with the House Agriculture Committee’s market structure draft bill - the CLARITY Act - as part of the Committee’s joint jurisdiction. DEF will continue to closely monitor this process and work to ensure DeFi and software developers are appropriately defined and protected in final legislation.

Unpacking the SEC’s New Rulemaking Agenda

On September 11, 2025, DEF published a blog on the SEC’s new rulemaking agenda, unpacking the most relevant rulemaking priorities to DeFi. The blog breaks down the DeFi implications for several key proposals in a detailed chart – including exemptions and safe harbors from securities regulation, rule amendments on crypto market structure, the definitions and scope of “broker” and “dealer”, as well as potential modifications to the Consolidated Audit Trail.

The SEC’s new agenda is a positive signal of a clearer future for digital assets and DeFi in the United States. DEF will continue to follow related developments, including the SEC’s upcoming roundtables discussing these reforms. Click here to read DEF’s full analysis.

HFSC Hearing on FinCEN

On September 9, 2025, the House Financial Services Subcommittee (HFSC) on National Security, Illicit Finance, and International Financial Institutions held a hearing to evaluate the Financial Crimes Enforcement Network (FinCEN). As Rep. Warren Davidson (R-OH) noted in his opening statement, the hearing’s goal was to “enhance security without trampling on privacy and innovation.” The hearing discussed topics such as the effectiveness of reporting requirements, new real estate reporting rules, data sharing and retention, cybersecurity and identity fraud, and the proper regulatory approach to digital assets.

Notably, Rep. Sam Liccardo (D-CA) raised concerns on the potential money laundering risks in DeFi protocols, referencing data without providing a specific source. In response, FinCEN Director Andrea Gacki confirmed that FinCEN is working on related issues by implementing certain directives from the GENIUS Act as well as the President’s Working Group Report, and expressed interest in working with the industry and law enforcement to develop the right approach.

“Today, [Bank Secrecy Act (BSA)] is dangerously outdated. The BSA's one-size-fits-all mandate wastes resources and erodes freedoms, often stifling innovation,” Rep. Warren Davidson explained. Lawmakers across the aisle agree on the need to modernize the BSA to create a more effective, risk-based system. For more on why the current BSA regime is outdated and incompatible with DeFi – see DEF’s analysis here.

DeFi Dictionary

DEF’s story started with a governance proposal to fund our creation.

So, the Word of the Week is near to our hearts: Governance Proposal.

Notable and Quotable