U.S. lawmakers have reopened negotiations on a long-delayed crypto market structure bill, but a proposed expansion of Treasury authority has ignited significant backlash across the digital asset industry. At the heart of the dispute is a provision that would allow the Treasury Department, in consultation with the SEC, CFTC, and Federal Reserve, to place decentralized finance (DeFi) protocols on a "Restricted List," effectively cutting off U.S. access.
Supporters frame the language as a national security safeguard, while critics argue it creates sanctions-level power with limited constraints, raising major concerns about due process, privacy, and the future of open-source finance. Under the draft language, Treasury could designate any DeFi protocol, front end, or associated class of entities as restricted if it determines the activity facilitates sanctions evasion, illicit finance, or threatens market stability or national security. Once listed, U.S. persons and financial institutions would be barred from interacting with the protocol unless a license is granted.
The provision also directs Treasury to publish an annual report assessing DeFi risks and to evaluate whether any large protocol qualifies as "truly decentralized." Critics, including policy analyst Scott Johnsson, warn this test is undefined and vulnerable to subjective interpretation, potentially allowing Treasury to pressure protocols into building compliance at the base layer, effectively eliminating privacy. Commentators also referenced the Tornado Cash case as a warning, arguing that once a protocol is designated, downstream users face criminal exposure even without direct wrongdoing.
Simultaneously, the debate over stablecoin rewards is intensifying as the Senate Banking Committee approaches a key markup vote on the bill. Crypto advocates, including Coinbase Chief Policy Officer Faryar Shirzad, are pushing back against efforts to ban yield-like payments to customers who hold stablecoins on platforms. Shirzad argued that Congress already settled this in previous legislation and that reopening the issue creates uncertainty, risks the future of the U.S. dollar on-chain, and cedes ground to China's Digital Yuan plans. The American Bankers Association, however, contends such rewards could incentivize customers to move savings out of banks, jeopardizing local lending.
Cody Carbone, CEO of The Digital Chamber, stated that stablecoin rewards are a major unresolved factor and that he has received assurances from lawmakers of "parity" between banking and crypto rules. The crypto industry is mobilizing, with plans for over 50 representatives to meet with Senate offices to push for the bill's passage. The broader bill aims to establish jurisdictional boundaries between the SEC and CFTC and set registration rules for exchanges.
