Industry insiders are concerned that this may hinder further clarification of laws in the blockchain industry.
It is reported that the proposal has not been made public, but there are indications that it will set multiple regulations for decentralized finance (DeFi) protocols. This includes a so-called "restricted list" for DeFi protocols deemed to be excessively risky.
Industry commentators believe that these measures may not be well-intentioned. Zunera Mazhar, Vice President of Policy and Government Affairs at the Digital Chamber, stated that the bill grants "broad powers, narrowly defines decentralization, and views the front end as a financial intermediary."
Following the introduction of the proposal, discussions in the Senate regarding the bill have been paused until Democrats and Republicans reach an agreement on the amendment meetings. Due to strong opposition from the industry, further work on the cryptocurrency framework bill has nearly come to a standstill.
The committee initially released the RFIA draft in July. Committee Chairman Tim Scott stated in August that the bill was expected to pass by the end of September. He also noted that the bill had received formal bipartisan support, which is a necessary condition for its passage.
The deadline has passed, and it now seems that achieving the RFIA will only become more difficult. As the issue has evolved into a partisan dispute, both sides are blaming each other for delaying the negotiation process.
Punchbowl News—the first media outlet to obtain a copy of the Democratic amendment—reported that follow-up meetings on the RFIA are currently on hold. Catherine Fuchs, Scott's Chief of Staff, stated, "We will pause all follow-up meetings until an agreement is reached on the amendment meeting dates."
Amendment meetings are the process by which legislators review the bill's content line by line and propose modifications.
Jacques Petit, Communications Director for Democratic Senator Ruben Gallego, attributed the legislative deadlock to the Republicans. He claimed that Republicans are asking Democrats for input, "only to leak our proposals in return, while pretending to be surprised by the policy differences on both sides."
He stated that it is pointless to set amendment meeting dates before an agreement on the bill text has been reached.
Republicans criticized Democrats for leaking communication content to the media. Jeff Naft, Scott's spokesperson, stated, "Leaking private communications during market structure negotiations says it all… It shows that one side is more focused on political posturing rather than on actual work."
Whether the bill can make progress in the committee seems to depend on which side budges: either Republicans return to the negotiating table, or Democrats agree to mark up the bill.
It is worth noting that the Banking Committee is not the only Senate body discussing the cryptocurrency framework bill.
As of October 6, it was reported that the Senate Agriculture Committee is still negotiating aspects of the bill related to commodities. There, Senator Cory Booker has taken over bipartisan negotiations with Senator John Boozman's office. It is currently unclear whether any progress has been made.
The focus of the controversy is the Democrats' proposal for a "restricted list" regulated by the U.S. Treasury, targeting DeFi protocols deemed "high-risk."
Summer Mersinger, CEO of the Blockchain Association, stated that this would "effectively ban the development of decentralized finance, wallet development, and other decentralized applications in the U.S." She pointed out that the current terms would make it difficult for decentralized applications to comply with regulations, and related development may shift overseas.
Mazhar believes that the Democrats' plan is outdated. "The measures are too harsh and ineffective, and will instead drive innovation overseas rather than address real risks." She suggested that DeFi regulation should focus on combating illegal financial activities and establishing a risk-based regulatory framework.
Jake Chervinsky, Chief Legal Officer at investment fund Variant, stated that the Democrats are not negotiating in good faith.
Someone has just submitted a counter-proposal to the RFIA, but the content is not serious. These senators claim to support cryptocurrency, but their proposal is essentially equivalent to a cryptocurrency ban.
Chervinsky believes that the proposal is less of a regulatory framework and more of an unprecedented and unconstitutional government takeover of the entire industry. This is not only a blow to cryptocurrency but also a hindrance to innovation, setting a dangerous precedent for the entire tech industry.
Alexander Grieve, Vice President of Government Affairs at investment fund Paradigm, recalled the "public enemy number one" of the crypto industry—former SEC Commissioner Gary Gensler.
If the Market Structure Bill falls somewhere between existing legislation and the new proposal in terms of developer protections, then this outcome would be even worse than any proposal put forth by Gensler.
As senators remain deadlocked over cryptocurrency and U.S. government funding issues, the prospects for the cryptocurrency industry's landmark legislation have become increasingly uncertain. Partisan divisions are deepening, and the blockchain industry is not immune to their effects.
As of the time of publication, the offices of Senators Booker, Scott, and Gallego had not responded to Cointelegraph's request for comment.
Related: Bitwise: 48 new Bitcoin (BTC) reserve companies added in just three months
Original article: “Democrats Counter U.S. Crypto Framework Bill, Legislation Stalls”
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