The release of the bipartisan draft law regulating the crypto market on Monday has left much of the crypto community feeling dissatisfied.
Much of the criticism has focused on banking lobbying groups. However, some argue that the real beneficiaries are large crypto companies, which are expected to protect the common interests of the industry.
Crypto's reaction to the 278-page proposal.
After months of negotiations , Senate Banking Committee Chairman Tim Scott has released the draft legislation outlining a framework for the crypto market. This move brings the CLARITY Act closer to passage, aiming to create clearer regulations for the digital asset market.
“ This bill is the result of months of serious work, incorporating the thoughts and concerns of the Committee members. It will provide the American people with the protections and certainty they deserve,” Scott stated.
This should have been a moment of celebration, but a wave of opposition soon followed as many prominent figures in the field began XEM the 278-page proposal.
Initial criticism focused on provisionsthat were perceived to favor banks , which have long clashed with crypto proponents over concerns that digital assets would erode traditional market share.
Attention is gradually shifting to aspects related to stablecoin returns . The latest draft limits companies from paying interest solely on balances, while also tightening the scope of permitted reward schemes.
However, not all crypto companies will be at a disadvantage if this bill is passed as is.
Large, established crypto companies appear poised to benefit the most, raising the question of where smaller players will stand within this new regulatory framework.
Why do major crypto projects benefit the most from the current proposal?
To better understand who would benefit if the bill were passed as it currently stands, BeInCrypto interviewed Aaron Day, a long-time crypto entrepreneur and frequent critic of policy, who has thoroughly researched the proposal.
The draft imposes many strict compliance obligations.
These include requirements for real-time transaction monitoring, expanded registration obligations, and mandatory use of qualified custodians. Combined, these regulations will significantly increase operating costs in the US crypto market.
Therefore, Day argues that only large, reputable crypto companies are capable of handling the initial burdens. Smaller entities will be at a disadvantage from the start.
“What you’re describing is the infrastructure Coinbase already has in place, something a small startup working in a garage certainly wouldn’t have. Coinbase has spent years and millions of dollars building relationships with regulators. This bill essentially legitimizes their competitive advantage,” Day told BeInCrypto.
Mr. Day also argued that Circle is a similar beneficiary. In his view, the stablecoin regulations in the bill favor large, well-regulated issuers. This makes the company behind USDC the most likely to benefit if the law is approved.
In parallel, the draft also requires exchanges to monitor transactions. Under these new regulations, all exchanges must track transactions in real time.
“Chainalysis benefits because mandatory oversight will keep the demand for their blockchain analytics tools alive. Now every exchange needs their services. This isn’t a conspiracy theory; it’s just how the ‘regulatory takeover’ process works,” Day added.
He emphasized that this is a common reality, where new regulatory frameworks often reinforce existing power structures rather than bring about change.
"Those who are already at the top of the market will contribute to drafting the laws, and then those laws will ultimately benefit them."
Therefore, smaller entities will face many difficult choices, with DeFi being the sector most susceptible to impact.
When decentralized finance requires government permission
According to Mr. Day, smaller exchanges will have only two options: either spend a lot of money to meet regulations or withdraw from the market altogether .
With DeFi, the bill could for the first time require programmers of protocols to register with federal regulators. This would mean treating them as regulated entities, rather than just neutral software developers.
“What makes DeFi so appealing is that anyone can build or participate without needing permission. If you have to wait for government approval to deploy smart contracts, then the original appeal of DeFi is almost completely lost,” Day Chia with BeInCrypto.
Although this draft bill doesn't directly ban DeFi , Day warned that it couldcreate numerous legal risks that might lead US developers to choose to develop products overseas.
However, the most noteworthy aspect of this proposal is that it completely contradicts Satoshi Nakamoto's original idea when creating Bitcoin.
Bitcoin's cypherpunk origins are under pressure.
Bitcoin was initially developed as a peer-to-peer payment system aimed at eliminating reliance on trusted financial intermediaries.
Nakamoto's anonymity and Bitcoin's cypherpunk origins underscore that financial privacy is a core principle, not just a secondary feature.
“When every transaction is monitored, reported, and even potentially Chia with foreign regulators, you’ve rebuilt the traditional banking monitoring system on a blockchain platform. You’ve retained the technology but discarded the original philosophy,” Day Chia .
He suggested that even the Bitcoin community might be Chia on this issue.
Some might argue that Bitcoin remains unaffected because users can still hold their assets and operate their own nodes. However, deposit/withdrawal points, especially centralized exchanges – where most users access Bitcoin – will certainly be under strict regulatory scrutiny.
Therefore, using Bitcoin will increasingly resemble using a traditional bank account.
“I’m not against regulations if the purpose is good. But I’m against regulations that are created by those already in power, designed solely to serve them, and then presented to the public as protecting consumers. This pattern repeats itself across many industries and administrations. Both sides are involved because they are both funded by the same vested interests,” Day concluded.
