Sneak preview of Senate's unfinished crypto market structure bill shows DeFi protected

A partial and unfinished draft of the U.S. Senate's legislation to regulate crypto reveals some of the important conclusions made on decentralized finance (DeFi), but the circulating document remains silent on other key points, including whether stablecoins should be tied to rewards or yield.

The document obtained by CoinDesk, circulating among the industry stakeholders late Monday night, is a portion of the legislation set for a hearing of the Senate Banking Committee later this week.

The Senate Banking Committee plans to hold a hearing Thursday allowing lawmakers to debate provisions in the 272-page bill, as well as offer amendments. Senators have until Tuesday evening to file amendments they wish to offer. A similar hearing in the Senate Agriculture Committee will now take place later this month, after its chair, Senator John Boozman, postponed it. Both committees will need to advance their respective bills before the overall Senate can take a look.

One of the central points of the ongoing negotiations — the question of stablecoin rewards and yield — remains marked with a "to be supplied" notation. The bill also does not seem to include any provisions addressing ethics concerns that Democrats on the committee laid out last fall, specifically referencing President Donald Trump and his family's ties to multiple crypto businesses.

The discussion draft includes provisions addressing how securities are to be regulated by the U.S. Securities and Exchange Commission, illicit finance, decentralized finance, banking and "responsible regulatory innovation."

The bill includes the Senate's "ancillary asset," a term previously introduced in an earlier draft from the Banking Committee. The House of Representatives did not include this term in its own counterpart legislation, meaning it will have to vote on the Senate version or force negotiations between the two houses of Congress.

The draft shared late Monday is not final, individuals familiar with the situation told CoinDesk.

It contains a never-seen-before section focusing on DeFi oversight. Though the bill does not include the same legal protections for developers as the Blockchain Regulatory Certainty Act introduced by Senators Cynthia Lummis and Ron Wyden earlier Monday, other provisions are included in the text, which gave DeFi insiders a first impression that the protections were weaker than in earlier version but that they hadn't been erased entirely as traditional finance lobbyists had aimed for.

Senators Jack Reed, Tina Smith and Chris Van Hollen wrote a letter to Committee Chairman Tim Scott earlier Monday, asking for a hearing to debate the bill prior to Thursday's markup.

"If the markup proceeds as scheduled, then Committee Members will have 48 hours to review text and less than 24 hours to prepare amendments before being asked to vote," the letter said. "We should not be asked to cast such a vote without sufficient time to analyze and review the text … This may be the most significant law considered by the Committee this century."