"U.S. Crypto Firms Demand Legal Clarity to Save DeFi Innovation"

A coalition of over 115 cryptocurrency firms, developers, investors, and advocacy groups has urged U.S. lawmakers to introduce protections for decentralized finance (DeFi) developers in market structure legislation, emphasizing the need to prevent open-source software creators from being misclassified or prosecuted as money transmitters. The letter, led by the DeFi Education Fund and addressed to the Senate Committee on Banking and the Committee on Agriculture, underscores concerns that regulatory ambiguity could stifle innovation and drive blockchain development out of the United States.

The letter highlights the recent case of Tornado Cash co-founder Roman Storm, who was found guilty of conspiracy to operate an unlicensed money transmitting business—a verdict that has sparked widespread criticism within the crypto industry. Critics argue that the ruling misrepresents the nature of many crypto protocols, which do not necessarily retain custody of users' funds. Amanda Tuminelli, executive director of the DeFi Education Fund, previously stated that such verdicts could jeopardize the future of crypto innovation and encourage developers to seek friendlier regulatory environments abroad.

The signatories of the letter represent a broad spectrum of the crypto ecosystem, including major players like a16z crypto, Coinbase, Kraken, Galaxy Digital, and Ripple. They argue that current regulatory frameworks are ill-suited for decentralized, open-source software and could force developers into compliance with rules designed for traditional financial institutions. The coalition also notes that the share of open-source software developers in the U.S. has declined from 25% in 2021 to 18% in 2025, a trend attributed in part to regulatory uncertainty.

The letter calls for the inclusion of explicit federal protections in the proposed Clarity Act and other market structure bills to ensure that developers and non-custodial service providers are not unfairly targeted under existing laws, such as 18 U.S.C. § 1960. It also advocates for federal preemption of state-level laws to avoid a fragmented regulatory landscape. The signatories argue that such protections are not only essential for innovation but also align with the U.S. government’s stated goal of positioning the country as the global “crypto capital.”

The DeFi Education Fund and its coalition partners have long pushed for a regulatory environment that supports open-source development while maintaining clarity for compliance. Recent developments, including the U.S. Securities and Exchange Commission’s dismissal of a lawsuit based on the Dealer Rule, have provided some relief to the industry, but advocates argue that more needs to be done to protect the broader ecosystem. The letter is part of an ongoing effort to ensure that the U.S. remains competitive in the fast-evolving DeFi space and does not lose its technological edge to other jurisdictions.

Source:

[1] Crypto industry calls for new bill to protect DeFi devs following ... (https://finance.yahoo.com/news/crypto-industry-calls-bill-protect-113715995.html)

[2] DeFi Education Fund lobbies Congress to protect ... (https://www.mitrade.com/insights/news/live-news/article-3-1076937-20250828)

[3] DEF & 110+ Partners Submit Coalition Letter on Developer ... (https://www.defieducationfund.org/post/def-110-partners-submit-coalition-letter-on-developer-protections-in-market-structure)