Disclaimer: Information found on CryptoreNews is those of writers quoted. It does not represent the opinions of CryptoreNews on whether to sell, buy or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk.
CryptoreNews covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.
DeFi Education Fund Advises Senate to Exercise Caution Regarding DeFi Regulation in Collaborative Letter
The DeFi Education Fund (DEF), a policy advocacy organization supported by an initial grant from Uniswap, has urged the US Senate Banking Committee to adopt a more cautious stance regarding DeFi regulation.
Key Takeaways:
- DEF calls on the Senate to differentiate DeFi developers from intermediaries in regulatory frameworks.
- The organization warns that existing regulations could inadvertently criminalize non-custodial software.
- DEF advocates for federal preemption to avert state-level challenges to DeFi innovation.
In an official reply to the draft Responsible Financial Innovation Act of 2025 (RFIA), DEF, along with a coalition of prominent crypto companies, presented a framework they believe can protect innovation while maintaining national security and consumer safeguards.
This response was co-signed by a16z Crypto, Jito Labs, Jump Crypto, Paradigm, Multicoin Capital, Solana Policy Institute, Uniswap Foundation, Uniswap Labs, and Variant Fund.
DEF Advocates for Clear DeFi Regulations and Developer Safeguards in Senate Reply
DEF’s response emphasizes four main pillars, which include differentiating between DeFi developers and intermediaries, clarifying which entities must register with federal authorities, establishing criteria for decentralization, and ensuring technology-neutral regulatory approaches.
These recommendations arise in the context of the Senate’s request for public input on the RFIA, which builds upon the previous CLARITY Act.
Lawmakers express their intention to balance market expansion with financial oversight, yet DEF contends that a nuanced comprehension of decentralized systems is crucial.
One pressing concern highlighted in the letter pertains to the ongoing federal case against Tornado Cash developer Roman Storm.
DEF critiques the current FinCEN guidance utilized in the prosecution, cautioning that categorizing non-custodial software code as a financial service establishes a perilous precedent.
“Software that does not take custody or control should not be regulated as an intermediary,” DEF asserts, calling for legislative clarification.
Today, the DeFi Education Fund team submitted a response to DeFi-related inquiries raised by @BankingGOP’s Digital Asset Market Structure RFI & recently published discussion draft of market structure legislation.
We are honored to have leading DeFi builders, investors &… pic.twitter.com/ZXWleD9S7I— DeFi Education Fund (@fund_defi) August 1, 2025
Related Posts
The coalition also stressed the necessity for federal preemption to supersede conflicting state regulations.
According to DEF, without preemption, well-resourced traditional financial entities could exploit state-level loopholes to target DeFi developers and hinder emerging competition.
Andreessen Horowitz Identifies Shortcomings in Draft Crypto Legislation
On Thursday, Andreessen Horowitz (a16z) similarly urged US lawmakers to reconsider and amend the draft crypto regulation bill, cautioning that the current proposal could create legal loopholes and diminish investor protections.
While the draft aims to clarify the regulatory environment for digital assets, a16z contends that the framework as currently written presents legal and structural risks, particularly concerning the classification of “ancillary assets.”
Ancillary assets refer to digital tokens sold alongside investment contracts, generally without granting buyers equity, dividends, or governance rights.
a16z indicated that utilizing this category as the basis for new legislation “without significant modifications” is problematic.
The firm believes this framework contradicts the Howey test, which is the established legal standard for determining whether an asset qualifies as a security under U.S. law.
“Rewriting Howey,” the letter stated, “would depart from settled law and endanger investor protections.”
Instead, a16z endorses the CLARITY Act’s narrower definition of “digital commodities” and recommends codifying a control-based decentralization model.
This would evaluate whether any party maintains unilateral control, operational, financial, or governance, over a blockchain system.
According to the firm, decentralization should signify the transition point at which an asset shifts from being classified as a security to a commodity.
The post DeFi Education Fund Urges Senate to Tread Carefully on DeFi Regulation in Joint Letter appeared first on Cryptonews.
