If the software developers behind decentralized finance (DeFi) are not adequately protected in the next crypto regulation bill expected to emerge from the U.S. Senate, the industry could still be pressed to oppose the legislation it has spent years advocating for.
At this point, it is the traditional financial industry – including securities industry group SIFMA – that is most aggressively seeking to push back against the demands of the DeFi sector, according to industry executives. This comes at a time when both relevant Senate committees plan to vote on the crypto market structure bill next week – an important step toward the Senate’s final consideration of the industry’s flagship legislation.
“We hope that what ends up in the bill will still protect software developers,” said Amanda Tuminelli, executive director of the DeFi Education Fund, in an interview with CoinDesk. She said her group had a chance to “work productively” with Senate and SIFMA staff in meetings, but some items remained uncertain. “I worry that the traditional finance players who are at the table just aren’t on the same page as us when it comes to promoting and protecting innovation,” Tuminelli said.
A SIFMA spokeswoman declined to comment. The organization has not made any substantial public arguments about its views on the crypto space, with the exception of a recent stance on tokenized securities.
In August, a unified crypto industry signed a letter to senators saying it would not be able to support a market structure bill that would not protect developers. The document was signed by Coinbase, Kraken, Ripple, a16z, Uniswap Labs and over a hundred other crypto companies and organizations, many of which are at the more centralized end of the industry.
DeFi insiders have several core requirements that they view as decisive for the survival of their technology, and that’s where their eyes will focus when legislative text emerges in the coming hours or days:
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Developer Protections: Protections for DeFi software creators that were previously offered in earlier versions of the Senate bill and the House of Representatives’ Digital Asset Market Clarity Act appear to remain in flux. If people who write code are held legally responsible for how others use their software creations, the DeFi movement will collapse, its supporters say. Tuminelli said his group “will ensure that developer protections are strong and comprehensive, meaning that software developers who do not act as intermediaries will not be treated as intermediaries for purposes of the securities laws and commodity laws.”
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Self-guard: The ability of individuals to hold their own digital assets is fundamental, the industry has long argued. The argument had already touched lawmakers, but resistance has grown from traditional financial firms over whether crypto firms can create self-custody tools for their own clients without running afoul of securities regulations. After the senators’ first negotiations for 2026 began this week, a document was released that shows the compromises that were made between the parties during these negotiations as well as the points that remain open. Self-guarding was one of these open points, according to the internal document. If the shield doesn’t stay, “that’s a red line for us,” Tuminelli said.
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Money transmitters: A bill from crypto fan Republican Tom Emmer, the Blockchain Regulatory Certainty Act, clarified that crypto developers and service providers that do not hold and control customer money are not money transmitters — a regulatory term for companies that manage the movement of funds between people, like PayPal and Venmo. Emmer’s bill was passed as a section by the Senate, and the DeFi industry would like to keep it that way, although this item is also still on negotiators’ to-do list. If promoters were thus treated as money services businesses, they would be directly subject to the Bank Secrecy Act, which applies strict requirements to prevent money laundering.
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Illicit financing: A section is expected to be added to the bill to address Democrats’ concerns about the use of cryptocurrency in illicit financing to enable money laundering, ransomware, and the financing of criminal and terrorist organizations. One concern among DeFi insiders is that this section will give the U.S. Treasury Department the authority to compile lists of banned protocols or developers. And again, if it imposes BSA laws on developers, it is a compliance impossibility because developers are not collecting the customer information required for BSA reporting.
