CLARITY Act Update: New Advocacy Group Targets DeFi Rules Ahead of Senate Vote

As the US CLARITY Act edges closer to a key Senate vote next week, a new advisory group has emerged, challenging the bill’s DeFi rules. This last-minute pressure campaign, as highlighted by Eleanor Terrett, highlights the ongoing debate and tensions surrounding DeFi regulation.

Crypto and TradFi Clash Over DeFi Rules in CLARITY Act

In an X post earlier today, Fox Business journalist Eleanor Terrett underscored the escalating tensions within the crypto regulatory ecosystem. Referring to the formation of a new advocacy group, called ‘Investors For Transparency,’ Terrett highlighted the unsettled tensions around decentralized finance.

Terrett noted that the group has launched an advertising campaign on Fox News, criticizing the CLARITY Act’s DeFi provisions. Just days before the critical Senate vote on the market structure bill, the group is urging the community to push back against the DeFi laws. Highlighting the long-standing uncertainty around DeFi regulation in the US, she added,

“DeFi remains one of the most divisive elements of the legislation, drawing criticism from lawmakers, traditional finance players, and the crypto industry alike. While the final wording of the DeFi provisions is still uncertain, more clarity is expected next week when the Senate Banking Committee unveils its section of the bill ahead of Thursday’s markup.”

Notably, the Investors For Transparency group surfaces just ahead of the CLARITY Act markup next week. As CoinGape reported recently, Senator John Kennedy confirmed that the market structure markup is scheduled for the coming week, with Chairman Tim Scott expected to vote.

Advocacy Group Faces Backlash

Despite the advocacy group’s strong presence, it faces backlash from the crypto industry. Drawing attention to the flaws in the group’s arguments, industry experts and enthusiasts warn that changes to the DeFi rules could bring major consequences.

While the group posits that the DeFi provisions pose critical threats like “deposit flights,’ industry experts dispute these claims. Pointing to the GENIUS Act, which already addresses the issue, preventing stablecoin issuers from distinguishing interest payments as “rewards,” they argue that the CLARITY Act is well-structured.

Further, crypto enthusiasts claim that $120 billion DeFi lending sector could collapse if the industry is forced to follow the Traditional Finance (TradFi) rules. An X post read,

“Forcing DeFi into TradFi compliance models would collapse the $120B decentralized lending sector overnight, vaporizing the 23% annual efficiency gains in cross-border settlements that blockchain enables. The Senate Banking Committee’s markup risks undermining existing statutory clarity just to appease banks whining about competition from code.”

Moreover, the advisory group is also facing criticism for its anonymity. Despite calling itself “Investors For Transparency,”  the group provides little transparency about its members or backers. Keith A. Grossman, a prominent crypto voice, noted, “Now all kidding aside, not a single reference on the site to who is backing “Investors for Transparency.”