Crypto Market Bill Draft Criticized For Allowing Continued Developer Prosecution

Initially, the bill was meant to include protections for developers. However, expert commentary suggests that it opens the door to continued prosecution of developers and enhances surveillance measures for users of non-custodial software. 

Additionally, the draft hints at possible applications to decentralized finance (DeFi) that could empower agencies to implement Travel Rule-like regulations, along with anti-money laundering (AML) measures targeting web-based interfaces and blockchain analysis firms.

While the BRCA offers exemptions under AML and counter-terrorist financing regulations, it continues to leave developers vulnerable to accountability for the actions of users utilizing their software. 

Pro-crypto Senator Cynthia Lummis remarked on this aspect of the BRCA, indicating that it retains all necessary AML protections, which implies that despite any positives, accountability remains a looming threat for developers.

Simultaneously, the “Keep Your Coins Act” within the draft includes provisions claiming that federal agencies cannot prohibit self-custody of digital assets. However, further stipulations assert that this right does not prevent the application of laws concerning illicit finance, leaving loopholes for government intervention.

The Securities and Exchange Commission’s (SEC) past attempts to impose a broker rule that would classify decentralized finance services as intermediaries requiring reporting obligations have been echoed in the current draft. 

Under the new sections, the Senate Banking Committee introduces a concept termed “Distributed Ledger Application Layers,” which the report claims invites scrutiny and creates compliance obligations for software applications that allow users to interact with decentralized finance protocols. 

As it currently stands, the lack of robust protections for developers and users involved in privacy-enhancing technologies in this current draft suggests that the Senate’s proposal for market structure will do little to safeguard non-custodial developers. 

Instead, it further entrenches their vulnerability to government oversight and user surveillance. Ultimately, these developments present a significant challenge for privacy software users and developers.

Featured image from DALL-E, chart from TradingView.com