The DeFi Debrief

Week of March 31, 2025: DEF Coalition Letter; Formal Repeal of "Broker" Rule; Senate Banking Hearing; SEC Roundtable

DEF Industry Coalition Letter on Unlicensed Money Transmitting Criminal Statute

Last week, DEF published a Coalition Letter addressed to members of Congress and co-signed by Paradigm, A16z, Coinbase, and dozens of other crypto-focused companies, kindly requesting Congress’ support in obtaining clarity on the unlawful reinterpretation of Section 1960 by the Department of Justice (DOJ). 

In our collective view, the regulation-by-criminal-indictment approach from the DOJ is inconsistent with the law and applies an overly expansive interpretation of the criminal code provision regarding operating an “unlicensed money transmitting business,” particularly as it relates to software developers. For more background on the issue, click here.

"The DeFi Education Fund’s number one policy priority is obtaining Congressional clarity on Section 1960, and we are so incredibly grateful to the broad coalition of crypto industry participants that united to defend the rights of software developers and to push back on the DOJ’s misguided approach of regulation by criminal indictment," said Amanda Tuminelli, Executive Director and Chief Legal Officer of the DeFi Education Fund. "On behalf of the crypto industry, we look forward to meeting with Congressional leaders to emphasize why this issue is of the utmost importance to ensuring the successful future of technology and financial innovation in the United States.”

DEF’s Take

As explained in our thread, DEF and our fellow signatories firmly believe that the definition of “money transmitting business” (found in the U.S. code in two places: 31 U.S.C. 5330 and 18 U.S.C. 1960) has always been clear: a money transmitting business requires possessing & transmitting funds on behalf of others. Together, DEF and our coalition partners urge policymakers to protect U.S. software developers from regulatory overreach, to encourage the development of DeFi technologies in the U.S., and to uphold confidence in the DOJ’s respect for the rule of law. 

Policymakers Protect DeFi, Formally Repeal the IRS’s DeFi-Killing “Broker” Rule 

Last week, the Senate voted to formally pass the “DeFi Broker” CRA, H.J. Res. 25. Another bipartisan supermajority of 70 Senators supported decentralized finance (DeFi) by voting “yea” on the resolution. 

Both chambers of Congress have now voted to disapprove of the Internal Revenue Service’s DeFi “Broker” Rule, which would have required DeFi industry participants that are not brokers to act as brokers. The now defunct rule would have inserted intermediaries where there are none; mandating that front-ends collect and report sensitive information on its users, causing untenable compliance costs, violating user privacy, and fundamentally exceeding Treasury Department’s statutory authority. 

DEF’s Take

DeFi Education Fund applauds the resounding bipartisan group of policymakers who have acted to protect decentralized finance in the United States. Next, President Trump is expected to sign the legislation into law once it is presented to him, as expressed in the Statement of Administration Policy on the legislation.

Senate Banking Committee Nomination Hearing 

Last week, the Senate Banking Committee (SBC) held a nomination hearing for Paul Atkins to Chair the Securities and Exchange Commission (SEC); Jonathan Gould to lead the Office of the Comptroller of the Currency (OCC) in the Department of the Treasury; and Luke Pettit to the position of Assistant Secretary of the Treasury. 

Notably, Mr. Atkins has historically supported crypto enterprises, and has invested in crypto-related assets.  In Mr. Atkins’ prepared remarks, he stated that under his future SEC chairmanship, he would work to “provide a firm regulatory foundation for digital assets through a rational, coherent, and principled approach.”

These nominations will now be up for a Committee vote to be advanced to the Senate floor for consideration. 

DEF’s Take

It is encouraging that leaders being nominated for high-level government positions are openly knowledgeable about crypto-related topics. DEF looks forward to working with the nominees once confirmed by the Senate. 

SEC Roundtable on Defining Security Status 

On March 21, the Securities and Exchange Commission’s (SEC) Crypto Task Force, led by Commissioner Hester Peirce, held a roundtable with several key participants in the digital asset industry, entitled “How We Got Here and How We Get Out - Defining Security Status.” The discussion focused on how the SEC could provide clarity on the treatment of various digital assets under the federal securities laws. 

Each panelist delivered an opening statement outlining views on how the SEC’s approach to crypto should evolve, highlighting tensions between innovation and investor protection, and discussing how current legal frameworks like the Howey test are inadequate for addressing the digital asset industry. Panelists also offered ideas on designing a token safe harbor, which would be a defined set of conditions under which the issuer of an asset would not be subject to securities law, or would be subject to a modified disclosure and compliance framework. 

DEF’s Take 

The roundtable demonstrates that the SEC is actively engaging with legal scholars and industry participants to grapple with how existing securities laws apply to digital assets and software protocols. At DEF, we believe a comprehensive safe harbor would bring clarity for token issuers who are unsure of how their asset fits under the federal securities laws in the US. 

We welcome the SEC’s collaborative, iterative approach to shaping the regulatory framework around crypto. Since the roundtable, the SEC has announced four more roundtables that will be taking place throughout 2025, including a DeFi-focused panel.