"Bought time"…DeFi industry launches full-court press to revise U.S. 'CLARITY Act'

After the U.S. Senate Banking Committee indefinitely postponed consideration of a crypto-asset (cryptocurrency) market structure bill dubbed the "CLARITY Act," the decentralized finance (DeFi) industry has moved into an all-out push to amend the legislation. The industry is increasingly arguing that the delay should be used as an opportunity to remove poisonous provisions that place excessive liability on software developers.

According to Cointelegraph on the 16th (local time), crypto venture capital (VC) firms and advocacy groups are using the weeks-long window before deliberations resume to pressure U.S. senators. The key points of contention are "developer protections" and "regulatory ambiguity."

Jake Chervinsky, chief legal officer (CLO) at Variant, said "the current draft leaves it unclear whether software developers or infrastructure providers would be forced to conduct know-your-customer (KYC) checks or be required to register with the U.S. Securities and Exchange Commission (SEC)," criticizing it as "regulation that does not fit DeFi’s realities."

Alexander Grieve, vice president of government affairs at Paradigm, likewise said "the top priority is to protect developers and the DeFi ecosystem," adding that "significant revisions are needed." The DeFi Education Fund also warned in a statement that "some proposed amendments could hinder technological progress and worsen market structure."

Some in the industry also raise the possibility of a compromise. Cody Carbon, CEO of the Digital Chamber, told Cointelegraph in an interview, "I’m confident we can reach a meaningful agreement within the next two weeks, including narrowing the definition of DeFi terminology."

However, uncertainties remain. With some Senate Democrats calling for tighter regulation, citing the potential for illicit financing via DeFi, significant friction is expected before a timetable for renewed consideration is set.