Securities Regulation Daily Wrap Up, BLOCKCHAIN—Group seeks infrastructure developer exemption from market structure legislation, (Aug 28, 2025)
A similar exemption was attempted and failed to garner support during negotiations over the Biden-era infrastructure bill.
The DeFi Education Fund, on behalf of 112 signatory organizations and companies, sent a letter to the leaders of the Senate Banking and Agriculture Committees urging them to support an amendment to market structure legislation currently wending its way through Congress that would exclude some blockchain developers from the scope of the emerging set of crypto laws in the U.S. The DeFi Education Fund said the absence of an exemption could limit U.S. blockchain innovation because, under current laws, blockchain developers could be swept into federal laws created to fight other issues, such as money laundering.
Specifically, the DeFi Education Fund said it wants senators to ensure that the market structure bill dividing regulatory oversight for blockchain and crypto matters between the SEC and the CFTC and other federal regulators not only excludes blockchain developers, whom the group refers to as “blockchain infrastructure developers and non-custodial service providers,” but also preempts similar state laws so that there will be a national standard protecting those at the periphery of on-chain activities that are properly addressed by federal law.
“These protections must make explicit that no individual or entity is subject to regulation solely for engaging in activities that are core to creating, developing, publishing, and maintaining blockchain networks, nor for enabling users to access such networks via software interfaces while maintaining custody of their own funds,” said the DeFi Education Fund.
The group added that “[l]egislation must shield developers from being misclassified or prosecuted as operators of money transmitting businesses...”
Although not mentioned in the DeFi Education Fund letter, the Senate, during debate of the Biden-era infrastructure bill tried and failed to include an amendment that would have achieved something similar regarding the Internal Revenue Code transaction reporting requirement that the bill enacted.
That exemptive amendment would have been phrased to“include[] any person solely engaged in the business of—(A) validating distributed ledger transactions, (B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distributed ledger, or (C) developing digital assets or their corresponding protocols for use by other persons, provided that such other persons are not customers of the person developing such assets or protocols.”
The proposed amendment to the infrastructure bill failed for procedural reasons when Democrats and Republicans could not agree on an unrelated defense department amendment. The Biden Administration IRS later issued a regulation in which it addressed the infrastructure bill provision (see pp. 106936-106937 for a discussion of legislative history and IRS policy towards “ancillary parties who cannot get access to information that is useful to the IRS”). However, that regulation has since been disapproved by a Congressional resolution that was signed into law by President Trump.
In support of its efforts to once again bring a statutory blockchain developer exemption to fruition, the DeFi Education Fund cited a report by Electric Capital suggesting that, during a four-year period that coincides with the Biden Administration, the U.S. experienced a 7 percent decline in open-source software developers. The group suggested that without a legislative exemption, blockchain innovation may flow to other jurisdictions.
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