Treasury enlists crypto firms to write their own compliance rules
H.R. 4394 — the CODE Act of 2025 · Filed by Sean Casten (D-IL) · Introduced Jul 15, 2025 · Referred to committee
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What it does
This bill directs the Treasury Secretary to convene a public-private partnership with decentralized finance (DeFi) companies and compliance experts to develop technical solutions for embedding anti-money laundering, identity verification, and sanctions controls into blockchain-based financial applications. The partnership will test these controls, recommend regulatory changes, and sunset after 18 months; Treasury must then issue formal rules requiring DeFi services to implement AML and sanctions compliance programs. The bill excludes government officials and their families from participating in the partnership.
Why we flagged it
The bill's core function is to establish a structured process for developing DeFi compliance standards through government-industry collaboration, followed by formal rulemaking. It is neither a deregulation nor a pure enforcement measure, but rather a framework-building exercise that delegates significant design authority to private participants.
What the text implies
- The partnership's recommendations (Section 3(5)) are non-binding on Treasury but must be 'taken into account' by agencies during rulemaking—creating a soft obligation that may entrench industry preferences into final rules without explicit legislative direction.
- Defining 'decentralized finance service' and 'decentralized smart contract' is deferred to Treasury rulemaking (Section 5), leaving the scope of future compliance obligations undefined until 30 months post-enactment; this creates regulatory uncertainty and potential for narrow or broad application depending on agency discretion.
The full analysis lists 5 implications of this text.
Who stands to gain
blockchain analytics firms; identity verification software providers; smart contract auditors