Bipartisan talks on crypto market structure legislation are grinding along as pressure mounts for senators to host a markup before the end of this month. A final agreement remains elusive.
As negotiations continue, one area has reemerged as the stickiest for lawmakers. One senator after another has told us that the intricate policy around decentralized finance, or DeFi, has continued to be an obstacle to agreement.
In theory, DeFi allows people to use financial services without an intermediary like a bank or broker. That raises fundamental questions about who is responsible when those protocols fail or otherwise harm consumers.
But the difficulty here doesn’t mean lawmakers are preparing to skirt the issue. In an interview Tuesday afternoon, Senate Banking Committee Chair Tim Scott (R-S.C.) said it was critical to get DeFi policy right within market structure legislation.
“We’re talking about a paradigm-shifting experience that is embedded in market structure. And if you don’t have DeFi as a major part of it, then you really don’t have a need for a market structure,” Scott said. “As I said to [Democrats], without DeFi, there is no market structure.”
The latest. Sen. Cynthia Lummis (R-Wyo.), who leads the Banking subcommittee on digital assets, said Monday night that the current negotiations boiled down to “a couple of DeFi items.” This has been a sticking point for a while – talks collapsed last time after Democrats proposed a DeFi policy outline that enraged the industry.
Sen. Ruben Gallego (D-Ariz.), the ranking member on the crypto subcommittee, was a bit more bearish about the work left to do but acknowledged DeFi as a point of friction.
“It’s more than a couple things out in DeFi, but we do have a good working relationship,” Gallego said.
Scott and Gallego both said the current disputes went beyond DeFi. “I frankly think that the problem they’ve had with market structure is a long list of things that just includes DeFi,” Scott said.
Gallego pointed to ethics standards that Democrats were continuing to push for in these talks.
Other problems. Democrats have become more worried in recent days that Banking Republicans may pull the trigger on markup before a bipartisan agreement is reached.
Lummis told reporters on Monday night she didn’t want a markup to proceed without buy-in from Democrats.
“I don’t even want to think about that occurring. I want to get there with the Democrats. I want them to be comfortable with this,” Lummis said.
That could change if talks stagnate well into the new year. We asked Scott whether he was willing to host a partisan markup, and the Banking Committee chair suggested his panel was prepared to eventually move ahead without Democrats.
“I assure you the one thing I want to see is a bipartisan bill signed into law,” Scott said. “But without that as a possibility, because the Democrats keep dragging this out, I will go ahead and let people know where everybody is on the bill.”
In trade news. U.S. Trade Representative Jamieson Greer will be on Capitol Hill today for a private roundtable with members of the House Ways and Means Committee. The meeting is bipartisan.
