WASHINGTON — Sen. Cynthia Lummis, R-Wyo., told a Capitol Hill audience Tuesday that she will introduce a “Clarity Act” within weeks, arguing the measure will address what she called the largest structural obstacle facing U.S. decentralized-finance (DeFi) projects: regulatory uncertainty.
Speaking at the Digital Assets Policy Forum, Lummis said the draft bill will create a legal distinction between software developers who write open-source code and entities that take custody of customer funds. “If you never touch consumers’ money, you should not be regulated like a bank,” she said, according to a recording provided by event organizers.
Industry attorneys have long complained that current securities and money-transmission statutes do not recognize non-custodial smart-contract systems, leaving major DeFi teams wary of serving U.S. users. Total value locked in DeFi protocols has fallen from a November 2021 peak of roughly $178 billion to about $68 billion today, according to data firm DeFi Llama, as projects relocate offshore or restrict American IP addresses.
Lummis, one of the most outspoken crypto advocates in Congress, is already co-author of the bipartisan Lummis-Gillibrand Responsible Financial Innovation Act, which remains stalled in committee. Staffers familiar with the new effort said the Clarity Act will be narrower, amending the Bank Secrecy Act and the Securities Exchange Act to exempt non-custodial protocol developers from licensing requirements while directing the Treasury Department to issue tailored anti-money-laundering guidance.
“We’re not creating a Wild West,” a Senate aide said. “Entities that hold customer assets or market tokens will still register with the SEC or CFTC. But publishing code by itself will not trigger 1950s-era rules.”
The Securities and Exchange Commission has taken the opposite view in recent enforcement actions. Chair Gary Gensler maintains that most digital tokens are securities and that existing laws already cover decentralized platforms. The agency brought 46 crypto-related cases in 2023, up from 30 the previous year, SEC statistics show.
Analysts at Bernstein noted that any standalone DeFi bill faces steep odds in an election year. “Hearings could move quickly, but floor time is scarce,” the brokerage wrote in a client note. Still, they added, “even partial legislative language could shape court interpretations now testing the SEC’s authority.”
Lummis said she is in “active talks” with both House Financial Services Chair Patrick McHenry, R-N.C., and Rep. Darren Soto, D-Fla., about introducing companion legislation. “We need to keep innovators in America,” she added.
Observers expect draft text to surface before Congress’s Memorial Day recess. Whether it reaches the president’s desk or simply influences ongoing litigation, the bill’s progress is likely to determine how — and where — the next generation of DeFi applications are built.