The US government has been going through a tough period since the shutdown of government activities at the beginning of this month. Adding to the tension is the leak of the Democrats’ DeFi legislation, which has led to a halt in negotiations between Senate Republicans and Democrats over crypto market structure legislation.
US lawmakers and regulators were actively discussing creating a legal framework for the crypto market structure, and the document was leaked during the meeting.
How did a DeFi leak derail crypto talks?
On October 8, Democrat staffers shared a document on the Senate Banking Committee with Republican counterparts. The document titled “Preventing Illicit Finance and Regulatory Arbitrage Through Decentralized Finance Platforms” included proposals for regulating DeFi.
The document leaked to the crypto industry, igniting urgent calls among the community and Republican offices to confirm the authenticity of the content.
Eventually, the Democrats’ leaked DeFi proposal stalled progress on crypto market structure talks.
What’s in the document?
The leaked DeFi regulation proposal outlines a comprehensive framework for bringing decentralized finance under US oversight.
The proposal requires regulation to empower the “Treasury, in consultation with the CFTC, SEC, and Federal Reserve, to publish an annual report assessing the national security and financial stability risks of DeFi platforms.”
The leak sparked backlash from industry leaders who said the proposal was stringent. For Jamison Sites, the DeFi proposal ensures crypto remains “offshore and unregulated”. The proposal, which has strict rules, according to him, will push crypto projects to move out of the country.
Zunera Mazhar, Digital Chamber VP, commented that the proposed ideas will “criminalize developers” and “stall innovation.”
Now, both parties are pointing fingers at each other for suspending the discussion on the crypto market structure and the exposed document. While lawmakers are trying to bring clarity to DeFi, the industry fears these measures could trouble innovation.
