A diverse group of blockchain developers, investors, and advocates has approached two Senate committees seeking comprehensive federal regulations that would safeguard software developers and non-custodial service providers involved in blockchain technologies.
The coalition, comprising over 115 organizations, expressed their concerns through a formal letter directed at the Senate Committee on Banking and the Committee on Agriculture, highlighting that explicit protections are crucial for their support of market structure legislation.
Demands for Regulatory Clarity
The organizations emphasize the need for lawmakers to delineate that developing, distributing, or maintaining open-source blockchain technology isn’t akin to managing a banking institution or a trading platform.
Concerns have emerged regarding the possibility of developers being classified as financial intermediaries despite not handling clients’ funds.
The coalition urges Congress to protect developers from prosecution or misclassification according to laws like 18 U.S.C. § 1960.
Moreover, they advocate for any federal legislation to override conflicting state laws, eliminating the burden of adhering to multiple legal frameworks across states.
Positive Developments Nonetheless
The coalition has praised existing legislative drafts, such as the Blockchain Regulatory Certainty Act and the Keep Your Coins Act, recognizing them as steps in the right direction.
However, they contend that these drafts need more explicit and robust language, arguing that the protections offered should be comprehensive and consistent nationwide. The letter warns that without this clarity, developers may migrate to more favorable jurisdictions.
Impact of Regulatory Uncertainty
The coalition cites alarming statistics indicating a decrease in the percentage of open-source developers in the US, shrinking from 25% in 2021 to an anticipated 18% by 2025.
A report from the President’s Working Group on Digital Assets outlines that reversing this trend is critical for establishing America as a leader in blockchain technology.
These figures illustrate how unclear regulations can influence where developers choose to live and work.
Legal Clarity: An Economic Imperative
The coalition argues that having unambiguous regulations is essential for business stability. The ambiguity surrounding the line between software development and financial services creates substantial legal risks for companies and contributors.
This climate of uncertainty can impose significant costs on startups and volunteers. If developers face potential legal repercussions for normal open-source activity, it can hinder or entirely halt project progress.
They request Congress to explicitly clarify that developing interfaces or tools enabling users to self-custody their assets should not automatically trigger money-transmitter regulations.
Encouraging Bipartisan Support
The coalition highlights past bipartisan efforts aimed at protecting developers. They point out that 294 congressional representatives advocated for the CLARITY Act, indicating widespread endorsement for foundational protections.
The organizations urge the Senate to amplify such protections now, ensuring uniform coverage across all states.
Image sourced from Unsplash, chart from TradingView
