Brian Armstrong, CEO of Coinbase, has criticized Senate Democrats’ controversial proposal to regulate the DeFi sector, which has reportedly stalled bipartisan talks on the long-awaited crypto market structure legislation.
For context, crypto journalist Eleanor Terret reported that Senate Democrats and Republicans were allegedly quarreling behind the scenes over a leaked proposal to regulate DeFi platforms in the upper chamber’s version of the crypto market structure bill, the Responsible Financial Innovation Act (RFIA).
The six-page document, named “Preventing illicit finance and regulatory arbitrage through decentralized finance platforms,” proposed establishing a “clear” regulatory framework for DeFi platforms by “defining accountability, clarifying oversight, and preventing the misuse of decentralized protocols for illicit finance, sanctions evasion, or to bypass market guardrails.”
“It lets Treasury regulate anyone with ‘sufficient influence’ in a DeFi protocol and also lets Treasury define ‘sufficient influence’ however it pleases,” Chervinsky explained. “It creates a ‘restricted list’ for protocols and front-ends that Treasury thinks are too risky, and then makes it a crime for anyone to use them. There is no limiting principle, defense, or recourse. Treasury is all-powerful.”
A Senate Banking Committee Communications Director, Jeff Naft, said that “What was sent to Republicans was not a legislative offer; the document was not written in legislative text, included multiple incoherent policy ideas, and was not a good-faith effort to engage on market structure.” As a result, negotiations have reportedly stalled.
However, anonymous sources told Terret that the leaked proposal was “meant as a starting point for discussions, not a final position,” and Democrats are seemingly frustrated that the document was made public.
Terret noted that the longer this incident drags on, the more likely the crypto legislation won’t arrive at the President’s desk this year. If it spills over to 2026, it risks losing momentum, as Congress shifts its main focus from digital assets regulation to the midterm elections.
