Does the New CFTC Draft Bill Spell the End of DeFi?

A leaked copy of the Digital Commodities Consumer Protection Act (DCCPA) draft bill has been uploaded to GitHub, leaving many industry watchers concerned about the outlook for decentralized finance.

The DCGPA bill will essentially determine the jurisdiction of the Commodity Futures Trading Commission (CFTC) on certain functions and areas of the crypto industry.

The copy of the draft bill was uploaded to GitHub on Wednesday by Gabriel Shapiro, General Counsel at Delphi Labs. Shapiro said he was making the bill available to the public in the name of transparency and open discussion of crypto law.

The crypto attorney drew attention to a section of the bill that contains a limited exception of the term “digital commodity trading facility” which would exclude those who develop or publish software.

While this would be perceived as a step in the right direction for DeFi, Shapiro said that he was informed that the inclusion of this exception is “a matter of significant debate.”

“Personally, I do not believe the Bill should be passed without respecting basic software freedoms, and that it will be unconstitutional if it requires licensure/registration of mere software–I encourage others to review the draft and make their opinions known,” said Shapiro.

The DCCPA bill was introduced by Senator Debbie Stabenow and Senator John Boozman in August and has gained the support of FTX-CEO Sam Bankman-Fried, who is still optimistic that the bill will provide customer protection on centralized crypto exchanges “without endangering the existence of software, blockchains, validators, DeFi, etc.

However, the bill’s language has already drawn criticism from members of the Blockchain Association, who called for revisions to the draft in its current state.

“The bill could be interpreted as a ban on decentralized finance (DeFi) – an unintended result of applying the same rules to centralized intermediaries and decentralized protocols,” wrote the Blockchain Association in a Sept. 15 blog.

Still, some members of Congress have shown support for the continued existence of DeFi in its current state, so there may still be reason to hope for a favorable outcome from the draft bill.

“Decentralization is the point. If we sacrifice DeFi for legislation, we’re throwing away the opportunity,” said Congressman Tom Emmer in a tweet yesterday.