US Senate Democrats Push Crackdown on DeFi Frontends

A new proposal from US Senate Democrats has reignited partisan tension in Washington’s crypto debate. The plan would tighten rules on decentralized finance (DeFi) frontends and empower the Treasury Department to blacklist risky platforms.

The move drew backlash from industry leaders who warned it could halt months of bipartisan progress. Analysts say the proposal shows a deeper divide over balancing security and innovation.

Senate Banking Committee Democrats sent the proposal to Republicans, seeking to extend Know Your Customer (KYC) requirements to crypto frontends — including non-custodial wallets — while removing legal protections for developers.

Momentum had been building since the House passed the Digital Asset Market Clarity Act 294–134 in July. Senators Ruben Gallego, Andy Kim, Raphael Warnock, Angela Alsobrooks, Lisa Blunt Rochester, and Mark Warner support the new plan.

The proposal immediately drew sharp criticism from legal and policy experts in the industry. Jake Chervinsky, chief legal officer at Variant, said it “isn’t about establishing clear rules; it’s about banning an industry.”

“It doesn’t regulate crypto—it bans crypto. This is less a framework than an unprecedented, unconstitutional government takeover of an entire industry,” he added.

1/ Senate Democrats are trying to kill market structure.

A group just sent a counter-proposal to the RFIA and it is deeply unserious. These Senators claim to be pro-crypto, but what they propose is basically a crypto ban.

It's hard to imagine a good deal happening right now