What to know:
- Senate delay leaves DeFi developers waiting until September for clearer federal rules.
- The measure could separate non-custodial software from firms that hold customer assets.
- The September 15 cloture vote requires 60 senators and bipartisan support to advance debate.
The US Senate delayed the CLARITY Act until September. The move extends regulatory uncertainty for decentralized finance, according to a 1inch analysis. Developers, non-custodial protocols, and self-custody services remain central to the Senate debate.
In an X post on Tuesday, Maylea Ma, the Senior Legal Counsel of 1inch, went through the draft of the market structure legislation. In her analysis, she concentrated on those clauses that would have a bearing on developers, non-custodial software users, and those who own their funds.
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How the CLARITY Act Could Protect DeFi Developers
Ma did not refer to this legislation as flawless. On the contrary, she questioned whether the imperfect federal system could provide better clarity than the existing one. She noted that the existing CLARITY Act has safeguards for non-custodial software developers.
She highlighted regulations concerning the Blockchain Regulatory Certainty Act (BRCA). She also cited regulatory controls for software development and self-custody. Other regulations that differentiate non-custodial applications from financial intermediaries.
Such a difference is critical for DeFi services that do not own or control the users’ money. The developers’ code allows making transactions directly, whereas the money stays under the user’s control. The different legal definition may affect the obligations of the service providers.
However, Ma highlighted that prior talks on the amendments to the Senate reduced the extent of some of these protections.
She also noted that final wording would be important as talks in the Senate proceed. For 1inch, the CLARITY Act must retain a clear boundary between developers and intermediaries.
The key issue is whether a non-custodial code would fall under obligations that apply to companies keeping their clients’ assets. The key issue is whether a non-custodial code will be subjected to obligations applicable to companies holding the assets of customers.
Why the September 15 CLARITY Act Vote Matters
According to Ma, an imperfect bill could be better than no law. Voting down the bill would not ensure a better alternative since the industry could continue being governed by administrative interpretations and enforcement decisions.
However, 1inch has not agreed with all iterations of the CLARITY Act. Ma gave an example of Coinbase’s pullout from the bill in support of its harmfulness to the industry as DeFi.
The following key vote will be the September 15 cloture vote in the Senate. The bill requires 60 votes to pass, which means that bipartisanship is absolutely critical. Further delays are still possible, even after the cloture vote.
According to Ma, the result is more complex than simply determining the CLARITY Act as positive or negative for DeFi.
The final version should provide genuine protection for non-custodial development and greater clarity than the current system of agency interpretation and enforcement.
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