Senator Lummis introduces a DeFi safeguards bill as a comprehensive market structure proposal approaches completion

Bipartisan Push for DeFi Protections in Senate Crypto Legislation

Senator Cynthia Lummis, a Republican, has teamed up with Democrat Ron Wyden to introduce a standalone bill that highlights a crucial decentralized finance (DeFi) provision. This move comes as the crypto sector and its advocates in Washington anticipate the release of a new draft of the Senate’s comprehensive market structure legislation.

The DeFi community has consistently argued that any regulatory framework must safeguard software developers—who do not have control over users’ assets—from being classified as money transmitters. Although an earlier version of the Senate bill included such protections, recent negotiations have put this section back into question. Lummis and Wyden’s new bill aims to ensure these protections remain, with Lummis stating, “We need to stop treating software developers as if they are banks simply for writing code.”

According to sources familiar with the initiative, this separate bill is intended to demonstrate bipartisan backing for the issue. However, its introduction as an independent measure raises uncertainty about whether it will ultimately be included in the broader Senate package.

The Blockchain Regulatory Certainty Act, which clarifies that developers who do not hold or manage customer funds should not be labeled as money transmitters, originated in the House of Representatives. It was later incorporated into the Senate’s market structure proposal, and now the Lummis-Wyden bill offers a Senate version that mirrors the House’s original intent.

Ongoing Negotiations Over Crypto Market Structure

Several contentious topics remain unresolved as lawmakers work to finalize the sweeping Senate bill that would establish a regulatory framework for U.S. crypto markets. Insiders report that the most heated debates involve illicit finance concerns, the specifics of DeFi regulation, the treatment of stablecoins with rewards or yields, and a Democratic push to address potential conflicts of interest for senior government officials—an issue reportedly aimed at former President Donald Trump.

Lobbyists expect the legislative text to be finalized as early as Monday evening, ahead of a Senate Banking Committee markup scheduled for Thursday by Chairman Tim Scott. Once the draft is released—possibly by Tuesday morning—it will reveal whether the committee is moving forward with a bipartisan agreement or a Republican-driven approach.

Complex Stakeholder Dynamics

Passing significant legislation is never simple, and this process is especially intricate due to the involvement of numerous stakeholders. In addition to both political parties and the White House, which is actively engaged, the negotiations must also accommodate the interests of banking lobbyists—who have recently complicated discussions over stablecoin yields—and the diverse crypto industry itself. Each group has identified non-negotiable issues that could determine their support for the bill.

The crypto sector is far from unified, with differing perspectives between DeFi advocates and centralized platforms like Coinbase and Kraken. While the industry has presented a united front on issues such as protecting software developers from legal risk—the final legislation may reveal whether these “red lines” are consistently defended across all segments.

Coinbase CEO Brian Armstrong has made it clear that his company will not support any bill that accommodates banking industry demands to restrict crypto firms from offering interest or rewards on stablecoins. In a December 26 post on X, Armstrong called this a “red line issue” and reaffirmed Coinbase’s commitment to advocating for its customers and the broader crypto community. Coinbase reported $355 million in stablecoin-related revenue for the third quarter of 2025.

Democratic Support Remains Uncertain

Observers predicted on Monday that the current draft may not address all of Democratic lawmakers’ key concerns. If the bill only secures Republican votes in committee, it casts doubt on whether it can attract the seven Democratic votes needed for passage, assuming full Republican support.

Democrats are expected to have until the end of Tuesday to submit their proposed amendments ahead of Thursday’s hearing, according to sources close to the process.

For Republicans, a lack of compromise could benefit Tim Scott, who not only chairs the committee but also leads the National Republican Senatorial Committee (NRSC), responsible for supporting GOP candidates in the upcoming election. The crypto industry was a major campaign contributor in 2024 and could potentially direct over $200 million toward favored congressional candidates. If Democrats are perceived as blocking crypto legislation, much of this support could shift to Republicans.

Senate Committees Adjust Schedules

While the Senate Banking Committee readies for Thursday’s markup, the Senate Agriculture Committee—also required to approve the market structure bill—has postponed its hearing. Originally planned for the same day as the banking panel, the hearing is now expected to take place at the end of the month. Chairman John Boozman, working with Democrat Cory Booker to resolve outstanding issues, stated, “To finalize the remaining details and ensure the broad support this legislation requires, additional time is needed before moving to markup. The committee will mark up this legislation during the last week of January.”

UPDATE (January 12, 2025, 22:02 UTC): Includes new details on the legislative process and ongoing negotiations.

UPDATE (January 12, 2025, 22:17 UTC): Reflects changes to the Senate Agriculture Committee’s hearing schedule.