A new market structure draft released by the U.S. Senate Agriculture Committee would explicitly keep self-custody wallets and non-custodial DeFi interfaces outside federal regulation, even as industry leaders including Brian Armstrong argue that broader crypto legislation in Congress continues to tilt in favor of banks and traditional financial intermediaries.
The proposal, known as the Digital Commodity Intermediaries Act, limits oversight to entities that take custody of customer assets or control transaction execution, sharply narrowing the Commodity Futures Trading Commission’s jurisdiction over crypto markets.
Self-Custody Wallets Explicitly Left Outside Regulation
Under the draft, the CFTC’s authority applies only to “digital commodity intermediaries,” defined as entities that hold customer funds, execute or clear transactions, accept or transmit orders, maintain margin or collateral, or act as counterparties.
Self-custody wallets that simply store private keys, sign transactions locally, and broadcast user-authorized transactions would not meet that definition.
As a result, such wallets would face no registration, KYC, AML, reporting, or supervisory requirements.
The bill treats self-custody as a personal user activity rather than a regulated financial service.
Non-Custodial DeFi Interfaces Protected
The draft similarly excludes non-custodial DeFi interfaces from regulation unless operators exercise custody or discretion.
Interfaces that allow users to interact directly with smart contracts, without routing orders, holding funds, batching transactions, or overriding execution, would fall outside the CFTC’s remit.
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This protection extends to DEX front ends, aggregators, wallet-embedded swap tools, protocol dashboards, and non-custodial bridges.
The bill also denies the CFTC authority to regulate software publishers solely for providing access to code, closing off what developers have described as “backdoor” regulation.
Control, Not Decentralization Claims, Triggers Oversight
The draft draws a clear boundary for when DeFi platforms become regulated.
Any interface that takes custody of assets, executes trades on behalf of users, controls routing logic, maintains collateral, or can halt or reverse transactions would be classified as a digital commodity intermediary and required to register with the CFTC.
The approach reflects a shift away from labeling toward functional control, signaling that calling a platform “decentralized” would not exempt it if it operates like a managed trading venue.
Armstrong Says Broader Bills Still Favor Banks
While Armstrong has welcomed clearer protections for self-custody and non-custodial software, he has publicly criticized parallel market structure efforts in Congress, arguing that some drafts would restrict competition by favoring banks and traditional brokerages.
Armstrong has said provisions in earlier proposals risked preventing crypto-native firms such as Coinbase from competing on equal terms by limiting their ability to offer services already available through banks.
He has framed the debate as one over whether crypto firms are allowed to compete fairly, or whether regulation entrenches existing financial incumbents.
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