112 crypto firms warn: Without legal clarity, U.S. risks losing blockchain innovation to global rivals

A coalition of 112 cryptocurrency companies, investors, and advocacy groups has urged the U.S. Senate to include explicit protections for software developers and non-custodial service providers in upcoming market structure legislation. The letter, sent to the Senate Banking and Agriculture Committees, emphasizes the need to prevent these entities from being misclassified as intermediaries under outdated financial rules. The signatories include major players such as Coinbase, Kraken, Ripple, a16z, and Uniswap Labs, along with nearly every major U.S. crypto lobbying group. The letter argues that without such protections, the industry cannot support a market structure bill. The signatories stress that these safeguards are essential to prevent innovation from leaving the U.S., avoid conflicting state laws, and build on the bipartisan support seen in the CLARITY Act, which passed with overwhelming backing.

Industry advocates argue that the U.S. risks losing ground in open-source development without strong protections. The letter points to data from Electric Capital showing the U.S. share of open-source blockchain developers dropped from 25% in 2021 to 18% in 2025, largely due to regulatory uncertainty. The coalition asserts that a clear federal framework is necessary to create an environment where innovators can confidently build financial infrastructure. The letter calls for explicit federal protections for blockchain infrastructure developers and non-custodial service providers to ensure the U.S. remains a global leader in crypto innovation.

The push for developer protections comes amid ongoing efforts to finalize market structure legislation. Senator Cynthia Lummis recently stated that a digital asset market structure bill will reach President Donald Trump’s desk “before the end of the year.” The bill aims to define the roles of the SEC and CFTC in overseeing crypto markets. Lummis suggested the bill could be advanced through the Senate Banking Committee by September and the Senate Agriculture Committee by October. The legislation will shape how the SEC and CFTC regulate crypto markets, with Lummis indicating the bill may arrive ahead of Thanksgiving. The CLARITY Act, which has passed in the House, is seen as a critical step in establishing a clear regulatory framework.

The CLARITY Act seeks to resolve longstanding jurisdictional disputes between the SEC and CFTC by establishing a three-tier classification system for digital assets: digital commodities, investment contract assets, and permitted payment stablecoins. The bill grants the CFTC exclusive jurisdiction over anti-fraud enforcement in digital commodities and requires intermediaries handling these assets to register with the CFTC. The SEC, on the other hand, maintains jurisdiction over investment contract assets and their issuances. The Act also includes provisions for the registration and regulation of intermediaries by both agencies and mandates the SEC to modernize recordkeeping requirements to accommodate blockchain technology. The CLARITY Act aims to provide regulatory clarity and reduce the risk of enforcement-based regulation, which has created legal uncertainty for market participants.

Despite its ambitions, the CLARITY Act has faced criticism from policy experts, investor advocates, and former regulators who argue that the bill could weaken investor protections and create new systemic risks. Critics point to the potential for regulatory arbitrage, where issuers might reclassify their assets to avoid SEC oversight. Concerns have also been raised about the CFTC’s capacity to handle the expanded regulatory responsibilities, particularly in overseeing retail-facing platforms and intermediaries. The CLARITY Act’s focus on digital commodities and the CFTC’s role contrasts with the Senate’s proposed Responsible Financial Innovation Act (RFIA), which emphasizes the SEC’s regulatory authority. The outcome of these legislative efforts will likely shape the future of the U.S. crypto market and determine the balance of power between the SEC and CFTC.

Source: [1] 112 Crypto Firms Urge Senate to Protect Developers (https://cointelegraph.com/news/crypto-industry-urges-senate-developer-protections-market-structure-bill) [2] Clarifying the CLARITY Act: What To Know About ... (https://www.arnoldporter.com/en/perspectives/advisories/2025/08/clarifying-the-clarity-act) [3] 100+ Crypto Firms Unite for DeFi Protections in Market ... (https://www.cryptoinamerica.com/p/100-crypto-firms-unite-for-defi-protections) [4] What a Digital Euro on Ethereum or Solana Means for ... (https://decrypt.co/336892/digital-euro-ethereum-solana-europe-monetary-sovereignty) [5] How to Choose a Crypto-Friendly Country for a Blockchain ... (https://legalnodes.com/article/how-to-choose-a-crypto-friendly-country-for-a-blockchain-business)