Justin Slaughter, a former senior adviser at U.S. Securities and vice president for regulatory affairs at Paradigm, warned that the U.S. crypto bill draft could face serious hurdles in Congress and in implementation, pointing to gaps in ethics, questions over how oversight would be shared, unresolved treatment of decentralized finance projects, and a heavy rulemaking load that could stretch across two presidential terms.
Ethics Gaps And Commission Control
Slaughter said that the lack of clear ethics rules and a requirement for both parties to be present at the important commissions would be a big problem for Democrats, who would want assurance about their involvement in the process.
There’s nothing at all on ethics (which is going to be a big hang-up for people), nor is there anything on a quorum requirement for the commissions. The Dems won’t sign a bill that doesn’t guarantee that some Democratic Commissioners will be able to help implement this bill, nor should they,” he said.
Most of the risk is concentrated in a few key sections
Slaughter noted that the most contentious issues are concentrated in a handful of sections dealing with how tokens are classified, when entities are under common control, how DeFi is defined, the handling of self-hosted wallets, and tokenization rules.
Second, the big issues with this bill are basically going to be found in just five sections: 102 on token classification, 104 on common control, 301 on the definitions of DeFi, 307 on self-hosted wallets (also in 604), and then 505 on tokenization.”
Democratic Priorities Dominate The Draft
According to Slaughter, the draft reads more like something a Democratic administration would advance, with a framework that is stricter and more favorable to the Securities and Exchange Commission than earlier proposals from the House.
It’s absolutely more stringent and friendly to the SEC than CLARITY was, which I think speaks to the degree to which the Senate is just more traditional than the House,” Slaughter said.
DeFi Launches Face Structural Problems
Slaughter argued that DeFi projects, which cannot be fully decentralized at launch, may struggle under the bill as written, because protections for developers may not clearly extend to today’s major protocols.
There probably needs to be some process of transitioning, because as written as a whole, some of the protections even for developers may not apply to key DeFi protocols that exist today. I think this is a flashpoint for the bill.”
Years Of Rulemaking And No Assured Passage
Slaughter also highlighted the scale of follow-on regulation, citing an estimate of about forty-five separate rulemakings, and comparing the likely timeline to the long rollout of the Dodd-Frank Act. Passage itself is not assured, he added, saying the coming debate will show whether a bipartisan path exists.
If this passes, the process of implementing this bill will not just run through this presidential term, it will probably run through the entirety of the next one,” he added.
Senate Panels Target Stablecoins, DeFi, and Conflicts Of Interest
Slaughter’s caution comes as the Senate Agriculture Committee pushes a planned markup of its crypto bill to the final week of January, saying it needs more time to settle details and secure bipartisan support, and as the Senate Banking Committee works on the Clarity bill. Together, the two efforts will put a spotlight on how to treat yield on stablecoins, how to regulate DeFi platforms and their developers, and whether to bar President Donald Trump and other elected officials from profiting from crypto ventures under the new rules.
