US Democrats propose adding high-risk DeFi protocols to the "restricted list"

ChainCatcher news, according to Cointelegraph, Democratic members of the U.S. Senate Banking Committee on Thursday introduced a proposal opposing crypto regulation, suggesting that the Treasury Department be authorized to place decentralized finance (DeFi) protocols deemed excessively risky on a "restricted list," and that using these protocols would be considered a crime.

The proposal also calls for the implementation of KYC rules for crypto application frontends (including non-custodial wallets) and weakens legal protections for crypto developers. Crypto lawyer Jake Chervinsky criticized the proposal, stating that it is "not regulating crypto, but banning crypto," and that it could undermine the bipartisan support previously gained by the CLARITY Act, which passed the House with a 294-134 vote.

Zunera Mazhar, Vice President of the Chamber of Digital Commerce, stated that such harsh measures would drive innovation overseas rather than address actual risks. The proposal stands in stark contrast to the bipartisan-supported Responsible Financial Innovation Act (RFIA) draft, which aims to provide more protection for crypto developers and reduce SEC overreach.