A leaked proposal by Senate Democrats would give Treasury sweeping powers to ban non-custodial services, establishing authority over what code can be deployed, and what code can't.

Last month, Senate Republicans published a draft for digital asset market structure known as the Responsible Financial Innovation Act (RIFA), that proposes to retroactively amend money transmission laws to protect developers and exempt non-custodial services from the Bank Secrecy Act (BSA), which governs the application of Know Your Customer (KYC) procedures.

Democrats and Republicans now need to agree on the text, but a leaked counter proposal suggests that finding common ground is not going to be easy: Democrats are proposing for the Treasury to be able to designate effectively any non-custodial software developer a digital assets intermediary, suggest introducing blacklists for DeFi software used for illicit activity, and applying KYC to non-custodial services.

Industry responses have since made clear: the Democrats' proposal is unworkable, but it may not yet be grounds to panic.

...read more at therage.co