Blockchain groups urge senators to reject CLARITY Act amendments that threaten DeFi and self-custody
DeFi advocacy groups, led by the DeFi Education Fund, lobbied senators ahead of a Senate Banking Committee markup on the CLARITY Act, urging rejection of at least eight proposed amendments they say would harm DeFi, developers and self-custody rights. Targeted amendments include proposals from Senators Jack Reed and Andy Kim (Amendment 42) to authorize Treasury sanctions on “smart contracts and centralized platforms” and Senator Catherine Cortez Masto’s Amendment 75 to prohibit transactions with unlawful DeFi protocols. Senator Elizabeth Warren filed more than 20 amendments, including Amendment 104 affecting distribution carve-outs for crypto offerings. The DeFi Education Fund warns amendments would narrow developer protections and expand FinCEN and Treasury authority, potentially burdening code instead of people. The Senate Banking Committee released a “Myth vs Fact” sheet defending the bill as an investor-protection measure that targets illicit actors without criminalizing code. The House passed its version in July 2025 (294–134). The markup and related hearings are scheduled for January 15, 2026, with industry players—such as Coinbase—warning they could withdraw support if stablecoin reward restrictions are added. The outcome is time-sensitive ahead of the November 2026 midterms, which could reshape legislative prospects.
Neutral
The news is neutral for markets because it describes a political and regulatory process with outcomes that could be either positive or negative for crypto prices. On the bearish side, amendments expanding Treasury and FinCEN powers or restricting stablecoin rewards could reduce yields, raise compliance costs, and disadvantage smaller DeFi projects—likely pressuring DeFi tokens and stablecoin-related products. On the bullish side, a clear regulatory framework (as proponents argue) can reduce structural risk, increase institutional participation, and benefit major exchanges and established stablecoin issuers. Short-term market reaction may include increased volatility around committee votes and headlines, with DeFi tokens under greater immediate downside risk if punitive amendments gain traction. Long-term impact depends on final language: narrowly targeted anti-money-laundering measures with developer protections could be neutral-to-positive by improving investor confidence; broad sanctions on code or expanded liability could be structurally negative for DeFi growth. Similar past events: market pullbacks followed headlines during SEC enforcement waves and the passage of stricter stablecoin rules in other jurisdictions; conversely, clarity-driven regulation (e.g., clearer tax or custody rules) has historically encouraged institutional flows. Traders should watch amendment votes, committee reports, and statements from major custodians/exchanges (e.g., Coinbase) for near-term directional cues and positioning risk.