A major U.S. cryptocurrency market structure bill has been delayed following a last-minute withdrawal of support from industry giant Coinbase and bipartisan warnings from Senate Judiciary leaders that a key provision could severely weaken law enforcement's ability to prosecute money laundering and other financial crimes.
The bill, championed by Senate Banking Committee Chair Tim Scott (R-S.C.), includes Section 604, which mirrors the Blockchain Regulatory Certainty Act. This provision would exempt certain blockchain software developers from financial licensing requirements, a move intended to protect innovation. However, in a private letter to Scott and ranking member Elizabeth Warren (D-Mass.), Senate Judiciary leaders Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) warned the language creates "a dangerously broad category of actors" exempt from criminal law. They argued it "was not consulted" on the provision, which falls under their committee's jurisdiction.
The senators specifically warned the exemption would have "likely precluded the government from bringing charges against" the founder of Tornado Cash, a crypto mixer platform used for money laundering. The National Association of Assistant United States Attorneys echoed these concerns, stating the bill would "materially limit prosecutors’ ability to pursue financial crime cases."
The debate centers on balancing developer protections with financial crime concerns in decentralized finance (DeFi). Democratic negotiators have raised alarms about DeFi being used for illicit finance and pushed for changes. GOP allies, like Senator Cynthia Lummis (R-Wyo.), argue the protections are essential, stating "Blockchain developers who have simply written code... have lived under threat of being classified as money transmitters for far too long."
The delay was triggered when Coinbase CEO Brian Armstrong called the latest draft "catastrophic" and withdrew the exchange's support, citing concerns over DeFi restrictions, tokenized equity bans, and stablecoin yield limitations. "We’d rather have no bill than a bad bill," Armstrong wrote. Following this, the Senate Banking Committee canceled its planned markup hearing on January 16th.
Industry backlash was fueled by surprise provisions applying AML/KYC rules to DeFi platforms and a rushed review timeline—the text was released just before midnight on a Monday, with amendments due 17 hours later. Other contentious points include expanded SEC authority over tokens and limits on stablecoin yields unless tied to specific activities like staking.
The outcome has significant implications for thousands of developers. Data shows Ethereum added over 16,000 new developers in the first nine months of 2025, while Solana's developer count grew 83% year-over-year. The legislative path remains uncertain as lawmakers navigate jurisdictional disputes and attempt to forge a compromise between innovation, consumer protection, and law enforcement capabilities.
