The DeFi Debrief

Week of May 19, 2025: Today's Cloture vote on GENIUS; Roman Storm Update; New SEC Roundtables; Executive Order on Overcriminalization in Federal Regulations

Senate Vote to Proceed on GENIUS Act TODAY

Today, Monday, May 19, 2025, the Senate will hold a floor session to vote on cloture for the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which is the Senate’s regulatory framework for payment stablecoins. 

The DeFi Education Fund team will be closely monitoring the vote and will continue to ensure that decentralized finance is protected under the legislation and any future amendments. Stay tuned by following DEF’s X account and by subscribing to the Weekly DeFi Debrief newsletter. 

DOJ Continues Case Against Roman Storm

On May 15, 2025, the Department of Justice (DOJ) filed notice that it is dropping one theory of its three charges against Roman Storm—the Section 1960(b)(1)(B) charge alleging operation of an unlicensed money transmitting business under federal registration laws—but will continue to trial on the other charges. While this is somewhat consistent with an April 2025 DOJ Memo from the Deputy Attorney General, calling for the end to “regulation by prosecution” and for the DOJ to stop indicting registration violations, it is not a total fix to the errors made by the DOJ in this case.

In short, the DOJ will continue with its illogical and unlawful theory of money transmission, which seeks to hold Roman Storm criminally liable for operating an unlicensed money transmitting business even though he never took control or custody over user assets and simply developed software. Despite the DOJ's flawed allegation, for any Section 1960 charge, the accused must be “transferring funds on behalf of the public,” pursuant to §1960(b)(2), which means the accused must have custody and control over other people’s funds. 

Software developers of noncustodial peer-to-peer protocols clearly do not exercise control or custody over user assets and are thus not money transmitting businesses or financial institutions under the Bank Secrecy Act. This was clearly stated by the Financial Crimes Enforcement Network (FinCEN) in their 2019 Guidance. Under any fair reading of the law and guidance, both of the Section 1960 charges should be dismissed.

The DOJ is also proceeding with charges for alleged money laundering and sanctions violations, which means trial will go forward as previously scheduled.

While we are disappointed that the DOJ only dropped the Section 1960 registration violation and not the other charges, it is important to note that this development reflects that advocacy works. DEF and many others in the industry, including Coin Center and Paradigm, have dedicated efforts to explaining to policymakers why DOJ’s theory of money transmission is incorrect and unsupportable. DEF urges leaders in the digital asset industry to join us in our continued advocacy to protect the builders of our decentralized financial future. 

For a longer explanation of the nuances of Section 1960, you can dig deeper into a paper written by Amanda Tuminelli, Dan Barabander, and Jake Chervinsky: 

Link to Paper

SEC Crypto Task Force Roundtable on Tokenization and DeFi

On May 12, 2025, Paul Atkins, Chairman of the Securities and Exchange Commission (SEC) delivered opening remarks at the SEC’s Crypto Task Force Roundtable on Tokenization entitled “Moving Assets Onchain: Where TradFi and DeFi Meet.”

Chairman Atkins laid out a forward-looking vision for integrating blockchain technology into the U.S. capital markets, with a central focus on promoting the tokenization of securities. Atkins advocated for a proactive, rules-based approach to guide digital asset market participants, encouraging innovation while maintaining investor protection. He noted that clear rules for tokenized security issuance, custody, and trading will position the U.S. to promote innovation and be a leader in the digital asset industry’s development. 

Commissioner Hester Peirce also made a speech at the roundtable, emphasizing the transformative potential of tokenization in modern financial markets. Commissioner Peirce further underscored the significance of interoperability and composability in decentralized finance (DeFi), noting that tokenized assets can seamlessly interact with various applications across blockchain networks. Commissioner Peirce called for the SEC to consider how these advancements may be integrated into existing regulatory structures to support innovation while ensuring investor protection. 

The tokenization roundtable featured two in-depth panel discussions: the “Evolution of Finance: Capital Markets 2.0,” and “The Future of Tokenization.” We commend the SEC for its continued commitment to engaging with a diverse range of stakeholders to inform its approach to regulating digital assets and for fostering a balanced environment where traditional finance and decentralized finance can coexist and thrive. As a reminder, the Crypto Task Force will be hosting a panel entitled “DeFi and the American Spirit" on June 9th. 

President Trump Signs Executive Order on Overcriminalization in Federal Regulations

On May 9, 2025, President Trump signed an Executive Order entitled “Fighting Overcriminalization in Federal Regulations,” which addresses proliferation of criminal prosecutions for federal regulatory violations. The stated purpose of the order is “to ease the regulatory burden on everyday Americans and ensure no American is transformed into a criminal for violating a regulation they have no reason to know exists.” The order directs federal agencies to disfavor criminal enforcement of regulatory offences, especially those lacking clear mens rea requirements, as well as strict liability offenses. Instead, the order encourages the use of civil enforcement and requires agencies promulgating regulations to “explicitly describe the conduct subject to criminal enforcement, the authorizing statutes, and the mens rea standard applicable to those offenses.”

Federal agencies are now required under the Order to publicly list all regulations carrying potential criminal penalties, specify the applicable intent standards, and ensure future rules explicitly disclose any criminal liability. Introducing this transparency requirement, coupled with a preference for civil or administrative enforcement over criminal enforcement, marks a significant shift in how regulatory offenses may be handled moving forward. 

For the DeFi community, the Executive Order offers potential relief from the chilling effects of criminal federal prosecutions for certain federal regulatory violations and strict liability offenses.  

DeFi Education Fund Blog Post on Digital Asset Market Structure Draft

On May 14, 2025, DeFi Education Fund (DEF) released a blog post exploring the recently released draft text of digital asset market structure legislation from the House Financial Services and Agriculture Committees. In the analysis,  DEF provides background on market structure, and specifically highlights parts of the draft text that could directly impact decentralized finance (DeFi), decentralization, and/or self-custodial technology. 

Click here to read the full blog.