Digital Commodity Intermediaries Act Passes Out Of Committee, National Security Remains Major Concern
"It is frightening what they are doing,” Senator says about briefings received on DeFi.
The Senate Committee on Agriculture, Nutrition, and Forestry has advanced the Digital Commodity Intermediaries Act out of committee following a markup session. The legislation, which is intended to be merged with bills from the Senate Banking Committee to form the CLARITY Act, establishes a regulatory framework for digital commodities regulated by the Commodity Futures Trading Commission (CFTC).
The draft bill passed the committee on a party-line vote of 12-11 following jovial discussions and voting on a handful of proposed amendments, with Republicans in favor and Democrats opposed.
Despite the partisan outcome, participants described the atmosphere as initially collaborative, though discussions grew pointed as senators addressed customer protections, self-custody, code development, ethics concerns, national security implications, and illicit finance risks.
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Ethics, Fraud, and ATMs
Sen. Cory Booker (D-NJ) emphasized the need for stronger safeguards in the current system while highlighting protections for innovation. “The system we have right now often screws customers,” Booker stated passionately during the hearing. Refreshingly, he added,
“We want protection for self-custody; we do not want to be criminalizing people who are writing code.”
An amendment to protect victims of cryptocurrency ATM scams, which would have set in place transaction limits, mandatory fraud warnings, and CFTC registration, was not agreed to under the argument that such provisions are already included in the Senate Banking Committee’s draft.
Booker also raised concerns about potential conflicts of interest in the policy process, specifically talking about President Donald Trump and his family’s involvement in cryptocurrency ventures. “The White House has made this infinitely harder… Donald Trump is grifting on crypto himself… [It is] ridiculous that the president of the United States and his family have made billions of dollars off of this industry, and are still trying to create a framework here without the kind of ethics that would prevent this kind of gross corruption in our country that would undermine our nation’s democracy,” he said.
Sen. Elissa Slotkin (D-MI) echoed those concerns, stressing the importance of ethical standards as well as threats to national security. She stated that if any president or official engaged in similar activities, regardless of party, “We would be having a conniption!”
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Debates On Terrorists, Cartels And Adversarial Nation States
Concerned with ransomware attacks on schools and hospitals, where crypto proceeds “dump out in China or Russia or North Korea,” Slotkin, quite hyperbolically, called for “real national security language in order to protect ourselves and our people.”
Sen. Ben Ray Lujan (D-NM) stated on the closing of regulatory gaps to combat illicit activity that “There is not one person on this committee who wants cartels and terrorists to take advantage of any of our financial systems,” he said. He continued, “This is about closing loopholes so that cartels and terrorists can’t do the bad shit they’re doing.” Lujan urged Senators to view briefings Congress has received on DeFi, calling it "frightening what they are doing."
An amendment by Senator Tommy Tuberville (R-AL) was offered to address foreign adversaries — and then withdrawn in lieu of future deliberation by the Banking Committee and on the Senate floor. The senator opened his remarks by saying that “America is a free market economy, but our economy is not a free-for-all.”
Worried about the meddling by foreign nation-states, particularly Chinese Communist Party interests, he said, “My amendment will keep America’s digital markets secure, private, and free from foreign influence.” To which Senator Lujan added, “This is something Democrats and Republicans should agree on, for the good of the American people.”
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The committee Chairman, Senator Boozman, expressed sympathy for many of the concerns raised by Democrats and associated amendments, but added that some of the proposals — such as preventing the Treasury or the Fed from ever bailing out digital asset intermediaries using taxpayer money — went way outside the jurisdiction of the current committee.
The newly appointed CFTC Chairman Mike Selig applauded the vote, and told Eleanor Terrett of Crypto in America in a joint-agency event with the SEC that, “The Ag draft is in a great place and I’m glad they put that through committee.”
As the bill stands now, it places regulatory burdens on custodial services and exchanges while offering exemptions for so-called DeFi software, although the definition of what constitutes common control of a DeFi software remains murky and demands more straightforward clarification to adequately protect non-custodial software and developers.
The legislation now advances to the full Senate for potential consideration, though requiring reconciliation with parallel efforts in other committees such as the Senate Banking Committee.
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