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The crypto advocacy organization DeFi Education Fund has urged the US Senate Banking Committee to reconsider its approach to regulating the decentralized finance sector after analyzing its recently released discussion draft regarding a crucial crypto market-structure legislation.
The reply, endorsed on behalf of DeFi Education Fund (DEF) affiliates such as a16z Crypto, Uniswap Labs, and Paradigm, stated that the Responsible Financial Innovation Act of 2025 (RFA) needs to be developed in a more technology-neutral manner, that crypto developers should be shielded from “inappropriate regulation intended for intermediaries,” and that self-custody rights for every American are “vital.”
Legislation should “tackle illicit finance but not disproportionately hinder DeFi innovation,” it emphasized in the Friday correspondence sent to Senate Banking Committee Chairman Tim Scott and Senators Cynthia Lummis, Bill Hagerty, and Katie Britt.
Senate Banking Committee appreciated the input
The banking committee sought input on the discussion draft to ensure it enhances the Digital Asset Market Clarity Act of 2025 to foster innovation in the $141 billion DeFi market without jeopardizing consumer protections or financial stability.
Safeguarding crypto developers a primary concern
The DEF also requested lawmakers to revise FinCEN guidance in the context of Tornado Cash developer Roman Storm.
“The rulemaking should indicate that technology composed solely of non-custodial, non-controlling software should not be categorized as a financial institution or financial intermediary.”
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The crypto advocacy group additionally called for federal preemption of state regulations to guarantee uniform protections for crypto developers across the nation.
“Well-resourced traditional financial entities may take advantage of the disjointed regulatory environment by supporting or promoting state-level enforcement actions against DeFi developers — not for consumer protection, but to suppress competition,” the DEF argued, stating that federal law should take precedence over conflicting state regulations.
A16z Crypto provided its own feedback
A16z Crypto, the digital currency division of tech-centric venture capital firm a16z, also delivered a separate response to the Senate Banking Committee on Thursday.
A16z’s primary concern regarding the draft cryptocurrency legislation is that it risks compromising investor protections by establishing perilous loopholes — particularly through its treatment of “ancillary assets.”
The company contends that redefining these assets without significant alterations contradicts current US securities law, especially the Howey test. It cautions that the proposal could enable insiders to exploit exemptions and sell tokens to the public without regulatory oversight.
A16z advocates instead for a “digital commodity” framework with distinct decentralization criterions.
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