U.S. lawmaker negotiations over market structure legislation appear to be ongoing, but contentious. You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions. Shutdown continues The narrative Policy work around digital assets seems to be in a bit of a limbo as the U.S. government shut down runs through its second week. There are signs lawmakers continue to work out details on market structure legislation, which the industry desperately wants in the hopes it will cement the roles of the Securities and Exchange Commission, Commodity Futures Trading Commission and establish just how the crypto industry will be treated by U.S. regulations. To that end, Democrats proposed certain rules around decentralized finance (DeFi) that members of the crypto industry quickly and loudly opposed. Why it matters The industry is still waiting to see what sort of market structure legislation eventually makes its way out of Congress. Senators' negotiations appear to have gotten ugly — at least publicly — based on reporting this week. Breaking it down Some Senate Democrats put together a proposal for regulating decentralized finance (DeFi), essentially treating any project that works with customers on the front end should register with a federal regulator and be treated as a broker. Any DeFi project that isn't geared toward revenue generation would be "sufficiently decentralized" and therefore not subject to regulatory oversight. It also contains a provision that would say developers have no legal liability for how their open-source projects are used, provided they aren't profiting off of the technology. The crypto industry was not thrilled by this proposal. Executives, lawyers and lobbyists alike argued that the proposal would harm the DeFi segment of the crypto industry, pushing back on it immediately. The proposed DeFi regulations, which were first reported by Punchbowl News and Politico, seemingly mark another point of contention between Republicans and Democrats working on the bill. According to Politico, the parties appear to be far apart, with Senate Banking Committee Chair Tim Scott pushing for Democrats to agree to a markup hearing before continuing to negotiate language and Democrats wanting more input on the actual text of the legislation. As a reminder, any market structure bill will need bipartisan support to get through the Senate, and last month a group of 12 Democrats most likely to vote for the bill laid out a list of priorities they want to see before they would support the legislation. It is possible that the DeFi proposal is stronger than it needs to be as a negotiating tactic, and can be watered down. A markup had originally been tentatively scheduled for September 30, and was pushed late last month to October 20, but it seems this date may also be in doubt. Several individuals I spoke to this week say they are more pessimistic that market structure legislation may happen before the spring, pointing to both the ongoing government shutdown and the lack of visible movement from lawmakers drafting the bill. As CoinDesk reported last week, while the shutdown is not a good sign for market structure negotiations, there's still time before the industry really needs to worry about whether this bill will happen in 2025 or not. This week Wednesday DC Fintech Week Day 1 Thursday DC Fintech Week Day 2 (I'll be moderating a panel; say hi if you're there!) PGP's DC Privacy Summit If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Bluesky @nikhileshde.bsky.social. You can also join the group conversation on Telegram. See ya’ll next week!