Hyperliquid Policy Center Warns of Potential Threat to DeFi Developers

The Hyperliquid Policy Center has spoken out about its concerns over the CLARITY Act, which is currently being debated in the US Senate. The center's CEO, Jake Chervinsky, has warned that unresolved language in Title 3 of the bill could have a negative impact on decentralized finance (DeFi) developers.

The main issue lies in the fact that non-custodial software developers may be mischaracterized as money transmitters under the proposed legislation. This would subject them to the same regulatory obligations as custodial firms, which Chervinsky argues would undermine the very principles of DeFi.

Chervinsky points out that the Blockchain Regulatory Certainty Act (BRCA) provides clarity on this issue, stating that non-controlling developers and providers are not financial institutions required to meet know-your-customer obligations under the Bank Secrecy Act. However, he argues that other portions of the CLARITY Act still contain language that could have the opposite effect.

The Hyperliquid Policy Center is calling for fixes to these issues in order to protect DeFi developers and ensure that the bill works as intended. The Senate Banking Committee has yet to schedule a markup on the legislation, but bipartisan progress is reportedly nearing completion.