Senate Dems’ DeFi Proposal Rehashes Biden-Warren Playbook — Threatening Dev Speech

Senate Democrats have floated a counter-proposal to the Responsible Financial Innovation Act (RFIA) that would recast software developers in the DeFi space as regulated intermediaries, effectively stripping protections around publishing code — a move strikingly reminiscent of policy ambitions during the Elizabeth Warren–influenced era under the Biden admin.

Jake Chervinsky summarized it bluntly: this counter-proposal reads as a crypto ban in disguise, despite the public posture of being pro-crypto. The core concern is that Democrats seek to force U.S. DeFi devs into “intermediary” status. That means any front-end, wallet UI, or protocol code might be forced under the same regulatory regime as exchanges and brokers — undermining First Amendment safeguards and chilling innovation.

What’s new (or old) about this

This is not entirely novel. Under the prior administration, Warren-driven voices pushed hard for treating software or code operations in financial systems as regulated financial activity. This new Senate draft continues that logic, now aimed squarely at decentralized protocols instead of centralized infrastructure.

The proposed Democratic rules go further in several worrying ways:

They give the Treasury wide latitude to define "sufficient influence" over DeFi protocols — that could sweep in token vote power, LPs, even UI front-ends.

They demand KYC obligations on front-end providers, including purely non-custodial wallets, forcing them to collect and process user data.

They create a "restricted list" mechanism, where protocols deemed risky could be criminalized, with no meaningful path to challenge designation.

Decentralization becomes moot; even if there’s no central point of failure today, the law would treat all participants as intermediaries by default.

Why this matters (and why it should freak DeFi devs out)

First, free speech. Publishing open-source code has traditionally enjoyed First Amendment protection. If protocol devs are reclassified as brokers or intermediaries, that protection could be eroded. Imagine being punished for shipping a smart contract, or redesigning front-end logic — not for misbehavior, but purely by virtue of writing protocol code.

Second, innovation chill. The regulatory risk shifts from misbehavior to mere existence. U.S. DeFi devs may feel forced abroad. VCs may hesitate to fund protocol devs inside the U.S. The playing field increasingly advantages foreign or opaque jurisdictions.

Third, political weaponization. The discretionary power given to Treasury could be used as leverage. Want to punish a protocol? Call it "sufficient influence". Want to freeze a competitor? Put them on the restricted list. The lack of remediation channels is dangerous.

Fourth, historical precedent. We’ve seen crackdowns on software builders before (e.g. crypto wallet maintainers, privacy tool authors). The logic is identical: treat code as regulated financial infrastructure. The Brennan / Warren playbooks have framed such attacks as "malicious intent disguised as compliance". We now seem to be entering that phase in DeFi.