The DeFi Education Fund, an advocacy group for decentralized finance, has identified several proposed amendments to the CLARITY Act, a piece of crypto legislation, which it claims would be detrimental to DeFi technology and software developers.
The organization highlighted eight specific amendments that it believes would "seriously harm DeFi technology and/or make market structure legislation worse for software developers." It urged senators to reject these measures, which were submitted by Senators Jack Reed, Andy Kim, Catherine Cortez Masto, and Elizabeth Warren, ahead of the committee's review of the CLARITY Act.
This latest opposition is part of ongoing discussions surrounding the CLARITY Act, which the Senate aims to pass before the 2026 midterm elections. The DeFi Education Fund's concerns were voiced just one day before the Senate Banking Committee's markup session, where amendments concerning developer protections, stablecoin yields, and anti-money laundering requirements were scheduled for discussion.
Key Amendments Under Scrutiny
The DeFi Education Fund specifically pointed to proposals that would grant the Treasury authority to sanction smart contracts, reduce the definition of non-controlling developers, and expand FinCEN's oversight of blockchain platforms.
Amendment 42, introduced by Senators Reed and Kim, was flagged for potentially giving the Treasury the power to sanction "smart contracts and centralized platforms facilitating illicit activity." Additionally, Amendment 75, proposed by Senator Cortez Masto, was noted for its aim to prohibit transactions with unlawful DeFi protocols.
Amanda Tuminelli, chief legal officer at the DeFi Education Fund, expressed the group's concerns, stating, "We're very conscious of how illicit finance is treated in the bill, but we need to make sure that there are not obligations put on codes instead of person, or make sure that there isn’t some inadvertent way that the technology is burdened in a way that it can’t comply."
In collaboration with Stand with Crypto, the DeFi Education Fund plans to evaluate senators based on their voting records concerning amendments that impact DeFi and self-custody rights.
Senator Warren, a vocal critic of the legislation, has put forth more than 20 amendments. The DeFi Education Fund highlighted Amendment 104, submitted by Senator Warren, which reportedly removed a "gratuitous distribution carveout for crypto offerings."
Senate Banking Committee Addresses CLARITY Act Misconceptions
The Senate Banking Committee, under the leadership of Republican Chairman Tim Scott, recently published a "Myth vs Fact" document to address prevailing misconceptions about the CLARITY Act.
One myth debunked was the assertion that "the bill enables illicit finance to occur through decentralized finance (DeFi) trading protocols." The committee countered this by stating that the bill's objective is the opposite: "It targets illicit activity while protecting lawful software development and innovation," emphasizing that "code is protected - misconduct is not."
Another myth addressed was that "the bill puts banks, taxpayers, and the financial system at risk." The committee clarified that the bill primarily serves as an "investor protection bill" by integrating digital assets into a clear regulatory framework, ensuring accountability for fraudulent activities.
According to the committee, the CLARITY Act is designed to prevent a recurrence of events like the FTX collapse. It aims to establish a regulatory framework that ensures investors are informed of material risks, prevents market manipulation by insiders, and penalizes bad actors. The document further clarified five other prevalent myths associated with the bill.
The House of Representatives had previously passed its version of the CLARITY Act in July 2025 with bipartisan backing, securing a vote of 294 in favor and 134 against.
Impact of Upcoming Midterm Elections
The approaching November midterm elections are a significant factor in the urgency surrounding the CLARITY Act's passage. Cryptocurrency exchange Coinbase has indicated it may withdraw its support if the Senate introduces restrictions on stablecoin rewards.
However, some critics argue that the current framework disproportionately benefits established entities like Coinbase and Circle, potentially at the expense of smaller innovators.
Crypto advocates acknowledge the need to expedite legislative progress, especially with the November midterm elections on the horizon. The outcome of these elections could significantly influence the legislative climate, potentially derailing progress if a less favorable political environment emerges.
The Senate Banking Committee and the Senate Agriculture Committee are scheduled to hold hearings on January 15, 2026, to discuss the CLARITY Act and consider potential amendments.