Democrats’ New DeFi Proposal Sparks Crypto Uproar

Democratic senators on the Senate Banking Committee have introduced a regulatory proposal targeting decentralized finance (DeFi) platforms, marking a sharp departure from earlier bipartisan efforts to establish balanced crypto rules. The draft legislation would impose bank-like Know Your Customer (KYC) requirements on non-custodial wallets and remove legal protections for blockchain developers—measures critics argue could effectively ban DeFi in the U.S.

The proposal threatens to derail recent pro-crypto momentum, including the House-passed CLARITY Act and the TRUMP administration's push to position America as a global digital asset hub. Crypto lawyer Jake Chervinsky condemned the plan as a de facto prohibition: "It doesn't regulate crypto; it bans crypto." The Treasury Department would gain authority to blacklist platforms through a new "restricted list" mechanism.