Crypto Firms Push for Legal Clarity to Save DeFi’s Future

The DeFi market is facing mounting calls for legal clarity and protections, as a coalition of over 115 crypto firms, developers, investors, and advocates urged U.S. lawmakers to amend the Clarity Act to shield open-source developers from legal misclassification. The letter, sent to the Senate Committee on Banking and the Committee on Agriculture, emphasizes the need for legislative recognition of protections historically afforded to open-source software developers [1]. The DeFi Education Fund, a16z crypto, Coinbase, Kraken, Galaxy Digital, and Ripple are among the signatories, underscoring the broad industry consensus on the issue [1]. The effort follows the recent guilty verdict of Tornado Cash founder Roman Storm, who was convicted of conspiracy to operate an unlicensed money transmitting business—a charge that has sparked industry criticism over its application to decentralized protocols [1]. Industry leaders argue that the ruling failed to reflect the nature of DeFi protocols, which do not centrally hold or control user funds [1].

The urgency of the issue is further amplified by recent data from Electric Capital’s Developer Report, which indicates a decline in the number of open-source software developers in the U.S., dropping from 25% in 2021 to 18% in 2025 [1]. This trend has raised concerns among industry stakeholders about the long-term competitiveness of the U.S. in the DeFi innovation race. The letter warns that failing to provide legal clarity could drive developers to more accommodating jurisdictions, undermining the U.S.’s goal of becoming the “crypto capital of the planet” [1]. Developers and industry advocates argue that the Clarity Act, as currently drafted, risks forcing DeFi developers into outdated regulatory frameworks designed for the traditional financial sector, potentially stifling innovation [1].

Parallel developments in the stablecoin sector highlight the broader push for regulatory experimentation in the U.S. crypto market. In late July 2025, Wyoming launched the Frontier Stable Token (FRNT), the first state-backed stablecoin in the United States [2]. Issued under the Wyoming Stable Token Act and chaired by Governor Mark Gordon, FRNT is designed to be redeemable 1:1 for U.S. dollars with a 2% overcollateralization buffer [2]. The token is deployed across seven blockchain networks and is backed by U.S. dollars and short-duration Treasuries [2]. The initiative, which includes private-sector partners for custody and infrastructure, is seen as a significant step in the U.S. government’s broader strategy to support a robust stablecoin ecosystem [2].

The launch of FRNT coincides with a growing international competition over stablecoins. In the U.S., the White House has reportedly supported stablecoin growth, as it could boost demand for U.S. treasuries [3]. Meanwhile, European and Chinese authorities are accelerating their own stablecoin initiatives, signaling a global "land run" in the digital asset space [3]. In particular, China is reportedly considering stablecoins backed by the Chinese yuan, marking a potential shift after a years-long crypto ban [3]. Hong Kong, a key financial hub under Chinese jurisdiction, already passed stablecoin legislation in May, allowing for stablecoins pegged to the Hong Kong dollar or offshore renminbi [3]. These global efforts underscore the strategic importance of stablecoins and the urgency with which governments are seeking to establish regulatory frameworks.

The intersection of DeFi and stablecoins has become a focal point in the U.S. crypto policy debate. While Wyoming’s FRNT represents a novel approach to digital currency, its legal standing remains uncertain, as it potentially falls outside the scope of the recently enacted federal stablecoin legislation [2]. The broader challenge for U.S. lawmakers is to strike a balance between regulatory oversight and fostering innovation. As the DeFi and stablecoin markets evolve, industry and government stakeholders are increasingly aligned in the need for clear, modern regulatory frameworks that support growth while addressing risks. The coming months will be crucial in determining whether the U.S. can solidify its position as a global leader in the emerging digital asset landscape.

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] Wyoming Launches First State-Backed Stablecoin FRNT (https://natlawreview.com/article/wyoming-launches-first-state-issued-stable-token)

[3] U.S. Exploring New Crypto Territory in Stablecoins (https://www.intelligize.com/u-s-exploring-new-crypto-territory-in-stablecoins/)