Senators Lummis and Wyden introduce a bill to protect DeFi developers from restrictive regulations, emphasizing the distinction between coding and financial management.
U.S. Senators Cynthia Lummis and Ron Wyden have proposed the Blockchain Regulatory Certainty Act, designed to exempt developers of non-custodial services from the requirement to obtain money transmitter licenses. This legislation aims to clarify that individuals creating software who do not manage user funds should not be regulated like traditional financial institutions.
"Writing code is not the same as controlling money, and developers who build blockchain infrastructure without touching user funds shouldn't be treated like banks. @RonWyden and I are ensuring that won’t happen," said Lummis.
The proposed act is part of a larger reform package for the cryptocurrency sector that the Senate Banking Committee is currently preparing, with discussions and potential voting set for January 15.
Support from the DeFi Community
The DeFi Education Fund has publicly endorsed the act, highlighting its importance in safeguarding software developers involved in decentralized technologies. They argue that the act will prevent misclassification of these developers as money transmitters under the Bank Secrecy Act.
"The Blockchain Regulatory Certainty Act provides critical protections for software developers of non-custodial, decentralized technologies," the DeFi Education Fund tweeted.
Additionally, the Solana Policy Institute has urged the SEC to make clear distinctions between centralized exchanges and decentralized finance protocols, asserting that labeling open-source code as an exchange is inappropriate. They warn that such regulations could hinder innovation and push businesses outside the U.S.
Recent Legal Precedents
The conversation around developer liability has gained urgency due to recent legal actions against developers of cryptocurrency mixers, such as Tornado Cash. In the U.S. and the Netherlands, developers Roman Storm and Alexey Pertsev face prosecution, raising concerns about whether coding can be seen as aiding illegal activities when developers do not access user funds.
Ethereum creator Vitalik Buterin has expressed support for Storm, who may face a lengthy prison sentence. This comes in the wake of a conviction against the founders of Samourai Wallet for laundering funds, highlighting the increasing scrutiny on developers in the cryptocurrency space.
In a related note, the U.S. Department of Justice indicated last August that it would cease prosecutions against DeFi application developers under the unlicensed money transmission statute, offering a glimmer of hope for those in the industry.
