Senate Democrats Propose Stricter Crypto Regulations
Democratic senators on the Senate Banking Committee introduced a new proposal to tighten cryptocurrency regulations. The plan could significantly impact decentralized finance (DeFi) platforms.
Shared with Republicans on Thursday, the proposal marks a shift from earlier efforts to create a balanced crypto framework. Critics warn the new rules could harm the industry.
The proposal requires crypto apps, including non-custodial wallets where users control their funds, to implement strict “Know Your Customer” (KYC) ID checks similar to banks. It also removes legal protections for blockchain software developers, increasing their risk of lawsuits or arrests.
This move may undermine bipartisan efforts like the CLARITY Act, which the House passed in July to create fair crypto rules. The proposal could slow the pro-crypto momentum the Trump administration is building to make the U.S. a global crypto hub.
Industry Experts Criticize the Proposal
Crypto lawyer Jake Chervinsky criticized the plan, saying, “It doesn’t regulate crypto; it bans crypto.” He and others argue it could effectively outlaw DeFi in the U.S.
The proposal would allow the Treasury Department to place risky platforms on a “restricted list,” potentially penalizing Americans who use them for profit.
Zunera Mazhar, Vice President at the Digital Chamber, called the rules overly strict and unhelpful. She warned the regulations could push innovation out of the U.S. by forcing companies to relocate instead of addressing illegal financial activities.
