Senate Deal Implodes: Grassley & Durbin Axe Developer Protections
Senate Judiciary leaders Chuck Grassley and Dick Durbin have blocked the inclusion of key developer protections in the market structure bill, citing money laundering concerns and killing the legislation’s bipartisan momentum.
The U.S. crypto industry’s most critical legislative vehicle just hit a wall. In a private letter obtained by The Block and Politico, Senate Judiciary leaders Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) formally opposed the inclusion of the Blockchain Regulatory Certainty Act (BRCA) in the pending market structure bill. The move effectively kills the bipartisan coalition needed to pass the legislation, forcing Senate Banking Chair Tim Scott to indefinitely postpone the committee vote.
The Receipt: Section 604 Under Fire
The conflict centers on Section 604, a provision designed to shield non-custodial software developers from being classified as money transmitters. Grassley and Durbin argue this creates a "dangerously broad" exemption that would hamstring the Department of Justice.
Their letter specifically cites the prosecution of Tornado Cash developer Roman Storm, claiming Section 604 would have "likely precluded the government from bringing charges" in similar money laundering cases. The Senators assert that changes to Title 18 (criminal code) fall under Judiciary jurisdiction, not Banking, and that they were not consulted.
"This is precisely the type of legislative change that falls squarely within the Judiciary Committee’s jurisdiction."
Market & Industry Impact
The collapse of the deal had immediate fallout. Coinbase withdrew its support for the bill hours before the markup was cancelled, citing the erosion of these very protections. Without the safe harbor, DeFi protocols remain exposed to the same strict AML/KYC statutes that govern centralized banks, a compliance impossibility for immutable code.
While the broader market stalled on the news, privacy tokens reacted with volatility. Tornado Cash (TORN) oddly ticked up (+1.9%) following the mention, likely on speculation that the legislative gridlock delays any new enforcement powers, though liquidity remains thin.
The Institutional Angle
This is a turf war disguised as policy debate. By invoking the "Genius Act" (passed July 2025) which settled stablecoin rules, banking lobbyists have been pressuring lawmakers to close what they call "loopholes" for DeFi. Grassley and Durbin’s intervention aligns the Judiciary Committee with these banking interests, effectively isolating the pro-crypto faction within the Senate Banking Committee. The path forward for a comprehensive market structure bill in 2026 is now effectively severed.
