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One hundred twelve digital asset sector “builders, investors, and advocates” have called on the United States Congress to provide robust, nationwide protections for software developers and non-custodial service providers in upcoming market structure legislation.

In an August 27 letter to the Senate Banking and Agriculture Committees, digital asset advocacy organization the DeFi Education Fund—along with its coalition partners—said that the industry spoke “with one voice” in urging lawmakers to provide explicit federal protections for blockchain infrastructure developers and non-custodial service providers.

“For the United States to become the ‘crypto capital of the world,’ market structure legislation must treat blockchain technology as neutral infrastructure and include comprehensive protections for the developers building it and the non-custodial service providers enabling users to access it,” wrote the 112 industry advocates. “It is critical that legislation recognizes and preserves the historical protections afforded to open-source software development, and ensures that software developers and non-custodial service providers […] are not forced into unworkable regulatory categories designed for the traditional, intermediated financial world.”

The letter was signed by several prominent names in the digital asset space, including a16z crypto, Chainlink Labs, Coinbase (NASDAQ: COIN), Kraken, Polygon Labs, Uniswap Labs, and the DeFi Education Fund, who penned the letter.

Regarding specific requests, the group asked for protections that ensure no individual or entity is subject to regulation solely for developing, publishing, and maintaining blockchain networks, nor for enabling users to access such networks via software interfaces while keeping custody of their funds.

In other words, blockchain technology developers don’t want to be on the hook for crimes committed by bad actors using their software.

They also indicated that any legislation should not regulate developers differently based on the type of software they create when they are not acting as intermediaries and don’t have control or custody of user assets.

Another demand was that legislation should shield developers from being misclassified or prosecuted as operators of “money transmitting businesses”—a category closely associated with accusations of money laundering, and the heightened compliance and due diligence checks that come with it.

Finally, the digital asset advocates argued that federal legislation must also preempt conflicting state laws to ensure legal clarity and nationwide consistency.

The recipient of the letter was the Senate Banking and Agriculture Committee, and the target was the Digital Asset Market Clarity Act of 2025 (or the CLARITY Act), a bill aimed at clarifying where certain digital assets stand in the U.S. regulatory framework and—importantly—which regulator has jurisdiction over them.

The CLARITY Act was passed by the House of Representatives back in July with overwhelming backing—a vote of 294-134, with 78 Democrats in favor—after which it moved to the Senate for debate and possible amendments, which is why the industry group is now voicing its hopes for the bill.

“We urge the Senate to improve on the developer protections in the CLARITY Act, and deliver clear, nationwide protections that will allow developers to innovate with confidence in the United States,” said the letter. “By doing so, the Senate can build on this bipartisan momentum and solidify American leadership in software development.”

US edges closer to crypto-CLARITY

The CLARITY Act was introduced to the House on May 29, 2025, by House Financial Services Committee Chair Rep. French Hill (R-AR).

In a signal of the broad support that would eventually see it comfortably pass its full House vote, the bipartisan bill was co-sponsored by several leading Democratic lawmakers, namely House Agriculture Committee Ranking Member Angie Craig (D-MN), Rep. Ritchie Torres (D-NY), and Rep. Don Davis (D-NC).

“Our bill brings long-overdue clarity to the digital asset ecosystem, prioritizes consumer protection and American innovation, and builds off our work in the 118th Congress,” said Rep. Hill, in his accompanying Press Release. “I look forward to delivering our bill to President Trump’s desk and securing America’s position as the global leader in digital assets.”

The CLARITY Act would live up to its name in a number of key ways, most significantly it would effectively solve the regulatory turf war between the country’s two top finance sector regulators, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), by handing the principal responsibility for regulating digital assets to the CFTC, with a lesser role for the SEC.

Under the bill, the CFTC would have primary regulatory responsibility over spot digital commodities, while the SEC would have additional jurisdiction over specific forms of digital assets, such as ‘permitted payment stablecoins’ as defined under the GENIUS Act. The SEC would be given the authority to prevent fraud, manipulation, and insider trading in the stablecoin context, while the CFTC would retain authority over stablecoin transactions that occur on a CFTC-registered platform.

It also includes several provisions that would exempt certain assets from being considered “investment contracts,” a form of regulated securities under the Howey test that fall within the jurisdiction of the SEC. Specifically, digital assets originally sold under investment contracts would be protected from being deemed investment contracts by association, and secondary distributions of digital assets—the sale of the asset by someone who is not the issuer—would also be exempt from being deemed an investment contract.

Another change is the creation of a new category of regulated entity called “Qualified Digital Asset Custodians.” These would be entities that hold digital assets on behalf of Act-registered persons or entities, and would fall under the CFTC’s purview.

The CLARITY Act currently sits with the Senate, awaiting debate, possible amendments, and eventually a vote. It must also be married with a parallel bill launched by several Republican Senators in July.

Parallel Senate bill

On July 22, Senators Tim Scott (R-SC), Cynthia Lummis (R-WY), Bill Hagerty (R-TN), and Bernie Moreno (R-OH) of the Senate Banking Committee released a discussion draft of their digital asset market structure bill, to be known as the ‘Responsible Financial Innovation Act of 2025.’

The 35-page discussion draft is significantly shorter than the 254-page CLARITY Act—on which the Senators said it builds—but it does outline a number of key changes and aims at “strengthening concepts established” by the CLARITY Act, as well as “expanding on those ideas to further encourage innovation and regulatory clarity for digital assets.”

Its provisions include defining an “ancillary asset” to clarify which digital assets are not securities, requiring the SEC to exempt certain offers or sales of ancillary assets from SEC registration, and pressing the regulator to “more clearly define what constitutes an investment contract.”

The draft also directs the SEC to tailor existing requirements to digital asset activity, “so that regulations are no longer outdated, unnecessary, or unduly burdensome in light of the unique technological characteristics of digital assets.”

In an accompanying press release, Scott said, “My colleagues and I in the House and Senate share the same goal: to provide clear rules of the road for digital assets that protect investors, foster innovation, and keep the future of digital finance anchored in America.”

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