Crypto Lobby Group Urges US Senate to Rethink DeFi Regulation
The DeFi Education Fund, a prominent crypto lobby group, has called on the US Senate Banking Committee to take a step back and reassess its approach to regulating the decentralized finance industry. The group’s response to the committee’s recently published discussion draft on the Responsible Financial Innovation Act of 2025 (RFA) bill is a significant move, as it seeks to ensure that the legislation is crafted in a way that promotes innovation without stifling the industry.
Key Concerns and Recommendations
The DeFi Education Fund, whose members include big names like a16z Crypto, Uniswap Labs, and Paradigm, has expressed several key concerns about the proposed bill. Firstly, they argue that the legislation should be more tech-neutral, allowing for the development of new technologies without being hindered by outdated regulations. They also emphasize the importance of protecting crypto developers from “inappropriate regulation meant for intermediaries,” which could stifle innovation and hinder the growth of the industry.
Furthermore, the group stresses that self-custody rights for all Americans are “essential,” and that any legislation should aim to address illicit finance without unfairly burdening DeFi innovation. This is a delicate balance to strike, but one that is crucial for the long-term success of the industry.
Senate Banking Committee’s Response
The Senate Banking Committee has welcomed the feedback from the DeFi Education Fund, which is a positive sign that they are open to listening to the concerns of industry stakeholders. The committee had requested feedback on the discussion draft in order to ensure that the legislation promotes innovation in the $141 billion DeFi industry while also protecting consumers and maintaining financial stability.
Protecting Crypto Developers
The DeFi Education Fund has also highlighted the need to update FinCEN guidance in light of the recent case involving Tornado Cash developer Roman Storm. They argue that technology that consists solely of non-custodial, non-controlling software should not be regulated as a financial institution or financial intermediary. This is a critical issue, as it could have significant implications for the development of decentralized finance applications.
In addition, the group is calling for federal preemption of state laws to ensure consistent protections for crypto developers nationwide. This is a crucial step, as it would prevent well-resourced traditional financial institutions from exploiting the fragmented regulatory landscape to stifle competition.
A16z Crypto’s Submission
A16z Crypto, the crypto arm of tech-focused venture capital firm a16z, has also submitted a separate response to the Senate Banking Committee. Their main criticism of the draft crypto bill is that it risks undermining investor protections by creating dangerous loopholes, particularly through its treatment of “ancillary assets.” They argue that redefining these assets without major changes is incompatible with existing US securities law, and could allow insiders to exploit exemptions and dump tokens on the public without regulatory oversight.
Instead, A16z advocates for a “digital commodity” model with clear decentralization requirements. This approach would provide a more robust framework for regulating the industry, while also ensuring that investors are protected and that the industry can continue to innovate and grow.
