2025 U.S. Crypto Market Structure Bills: Why Is DeFi Regulation the Core Flashpoint?

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#CryptoMarket #DeFi

On Capitol Hill, industry executives and senators are gathering — not just for “talks,” but at a pivotal moment for structural change across the entire crypto industry. As the Responsible Financial Innovation Act (RFIA) and other market-structure bills advance, the regulatory focus is shifting quickly from the asset layer of “Bitcoin and Ethereum” to the organizational architecture and liability of “decentralized finance (DeFi)” protocols and platforms. For the industry, this is not only about a path to compliance; it could reshape business models, competitive dynamics, and the sector’s regulatory standing.

According to reports, top crypto executives and Donald Trump’s “crypto czar” David Sacks will convene on Capitol Hill to meet Senate Republicans and Democrats working to move market-structure legislation forward. Their goal: restart bipartisan talks and get a bill to President Trump before the midterms make it a secondary priority.

Roughly ten industry leaders are expected to attend, including:

• Coinbase CEO Brian Armstrong;
• Galaxy Digital CEO Mike Novogratz;
• Kraken CEO Dave Ripley;
• Chainlink CEO Sergey Nazarov;
• Uniswap CEO Hayden Adams;
• Circle Chief Strategy Officer Dante Disparte;
• Ripple Chief Legal Officer Stuart Alderoty;
• Jito Chief Legal Officer Rebecca Rettig;
• a16z crypto General Counsel Miles Jennings;
• Solana Policy Institute Director Kristin Smith;
• Paradigm VP of Regulatory Affairs Justin Slaughter.

 

Background to the Market Structure Bills: Why Is “Structure” More Complex Than “Assets”?

In recent years, the crypto industry has pressed for a unified federal framework to replace a fragmented, enforcement-first, after-the-fact approach. The U.S. Congressional Research Service (CRS) notes that fragmented oversight of crypto markets leads to overlapping intermediaries, platforms, and asset types — and muddled agency jurisdiction.

By 2025, a bigger lever appeared: stablecoin legislation such as the GENIUS Act has passed, marking a systemic step forward in fiat digitalization. Next up, the real challenge is rule-setting for trading, clearing, lending, and decentralized protocols — i.e., the market structure layer.

From recent reporting we can see: multiple industry leaders (including Coinbase’s Brian Armstrong and Chainlink’s Sergey Nazarov) met senators to discuss the market structure bill and DeFi regulation. This signals that regulation must go beyond asset classification (securities vs. commodities) and drill into protocol forms, platform roles, user protection, and compliance responsibility — a far more complex task than simple asset rules.

Why Has DeFi Become the Core Controversy?

Although Bitcoin and other digital assets have long drawn regulatory scrutiny, the real “core topic” of this legislative cycle is DeFi. Reasons include:

Disintermediation challenges the traditional regulatory blueprint

Traditional finance rules target intermediaries (banks, exchanges, custodians). DeFi protocols often lack clear intermediary roles: no obvious corporate HQ, no day-to-day “middleman company,” but rather open-source code and self-executing smart contracts.
Drafts from Democratic senators explicitly bring front-ends, protocol controllers, and operators under the umbrella of digital asset intermediaries. If this sticks, many DeFi protocols could face registration, KYC/AML, and disclosure obligations — directly touching their native decentralization.

Large risk exposure and obvious blind spots

The proposals prioritize preventing regulatory arbitrage and illicit finance via DeFi. Protocol structures can facilitate cross-border lending, algorithmic leverage, and anonymous liquidations — gaps regulators deem urgent to address.
Industry fears that defining front-ends or protocol controllers as intermediaries will sap innovation, raise compliance costs, or infringe decentralized user rights. As reported, the proposal “infuriated much of the industry.”

Restarting talks and the need for certainty

The meetings aim to restart negotiations and reduce uncertainty. As one Chainlink executive said afterward, both sides have “considerable common ground,” but process and timelines remain unclear. The dialogue suggests a framework is taking shape — and the industry must prepare.

Positions and Policy Fault Lines

Key disputes currently center on:

(1) Who is the lead regulator: SEC, CFTC, or Treasury?

Historically, securities fall under the SEC and commodities under the CFTC. Crypto blurs that line. Democratic drafts reportedly give Treasury authority to assess whether a project is “sufficiently decentralized” and to sweep it into the “digital asset intermediary” bucket. A potential three-headed oversight raises concerns about overlap, clarity, and compliance cost.

(2) Protocol vs. intermediary: where is the regulatory touchpoint？

Regulating companies as intermediaries is familiar terrain. Extending oversight to open-source protocols, front-end UIs, or tacit yield control vastly expands the scope. Drafts that treat “front-end applications” as intermediaries are especially contentious.

Industry voices argue that making protocols bear intermediary obligations conflicts with Web3 design principles and risks stalling innovation.

(3) Timelines and legislative priority.

While Coinbase’s CEO says a bill “could pass this year,” relevant Senate committees have paused sessions, and timelines may slip to next year. In practice, both parties are tying “final dates” to conditions, leading to gridlock.

Result: even with strong intent, the path from draft to law is not linear.

Industry Impact: From Acceleration to Compliance Transformation

As regulatory structure is rebuilt, the crypto industry will see shifts:

A. Business model rewiring

Many DeFi protocols have touted “permissionless, intermediary-free” designs. If new rules treat front-ends or protocol operators as intermediaries with KYC/AML duties, costs could rise and flexibility fall. Some projects may exit the U.S. or refactor toward deeper decentralization.

B. Higher compliance costs and market entry thresholds

Once enacted, a formalization wave will follow: platforms need compliance monitoring, custody standards, audits, and disclosure mechanisms. This is a steeper hill for smaller projects.

C. U.S. role and global competitiveness

If the U.S. leads with a predictable and industry-friendly market-structure regime, it could attract global capital and projects. If rules are overly strict, capital could flee. Leaders hope to land it before the midterms to cut uncertainty.

D. DeFi legalization and innovation pathways

Clear rules could give DeFi legitimacy, bolstering user trust and unlocking institutional capital. But if the framework mirrors legacy finance too closely, it could suppress decentralization and first-principles innovation. The sector stands at this fork.

Conclusion

Crypto is moving from asset innovation to market-structure innovation. As DeFi regulation becomes the core flashpoint of U.S. market-structure legislation, the shift is not just legal — it’s a holistic remapping of ecosystem positioning, business models, and technical design.

For the industry, the rational stance isn’t resistance, but to embrace structural change, engage in policymaking, and ensure sustainable compliance. At the same time, regulators must strike a balance: safeguarding innovation while building a reliable, transparent, and competitive market system.