The US House of Representatives approved digital asset market infrastructure, the CLARITY Act, last July. Since then, the legislation has been stalled in the Senate as members hash out potential changes to the language of the bill, with Republicans distributing their draft and, more recently, Democrats sharing their version. The Democrat version has led crypto insiders to criticize the Democrats’ proposed bill.
Yesterday, the Blockchain Association disseminated a statement on the Democrats’ version of the bill. Credited to Summer Mersinger, CEO of the Blockchain Association, she hammered the Democrats’ draft.
“The disappointing proposal outlined by Senate Democrats would effectively ban decentralized finance, wallet development, and other applications in the United States – an outcome that’s neither workable nor consistent with American innovation. The language as written is impossible to comply with and would drive responsible development overseas. We urge our policymakers to stay at the table, continue to engage each other across the aisle, and ensure this critical piece of legislation supports – rather than hinders – our nation’s leadership in financial technology.”
Brian Armstrong, CEO and founder of Coinbase (NASDAQ:COIN), quickly chimed in, describing the proposal as harming innovation:
“It’s a bad proposal, plain and simple, that would set innovation back, and prevent the US from becoming the crypto capital of the world. But legislating is a process, and we’re committed to engaging and helping Congress get it right. We will keep fighting for your rights, and to preserve economic freedom.”
Mersinger, in a series of posts, described the bill as a “non-starter,” stating what Democrats want would “make compliance impossible while pushing Fintech development offshore.
“To be clear, strong DeFi protections must be at the center of any market structure legislation. This is exactly why it’s so critical for Congress to get market structure legislation done right. We need clear, balanced rules that protect consumers and allow innovation to grow in the United States,” said Mersinger.
She added that America must lead. Not follow, in regard to digital asset innovation.
The Responsible Financial Innovation Act, the Senate’s version of the CLARITY Act, was distributed in September following a shorter version published in July. In the draft bill, Republicans outline a decentralized governance system. It also defines a Decentralized Trading Protocol and a Decentralized Physical Infrastructure Network. In general, decentralization alludes to disintermediation where a central entity acts as an intermediary in a transaction.
While the Democrat proposal has not been widely distributed (yet), Politico reported that a staffer for Senate Banking Chairman Tim Scott called the proposal “not written in legislative text, included multiple incoherent policy ideas, and was not a good-faith effort to engage on market structure.” CoinDesk shared that one of the hurdles was an attempt to require DeFi operations to register with the SEC or CFTC and be treated like a broker.
Beyond a DeFi impasse, there are other special interests seeking to alter the bill.
The North American Securities Administrators Association (NASAA) issued a statement claiming the Republican proposal would “weaken vital investor protections and expose more Americans to fraud and abuse.” NASAA is notoriously thin-skinned when it comes to any real or imagined impingement on its state regulatory operations.
It now appears that digital asset infrastructure legislation will be delayed further into the end of the year, undermining hopes that an agreement could be reached sooner.
Any bill approved by the Senate will dramatically alter the financial services sector and markets, as the advent of digital assets and distributed ledger technology is poised to impact all asset classes – including some that have yet to be created.
