The Democratic Party of the United States proposed to include high-risk DeFi protocols on the "restricted list."

ChainCatcher news, according to Cointelegraph, Democratic members of the U.S. Senate Banking Committee proposed a counter-proposal for crypto regulation on Thursday, suggesting that the Treasury Department be authorized to place decentralized finance (DeFi) protocols deemed too risky on a "restricted list," making the use of these protocols a crime.

The proposal also calls for the implementation of KYC rules for crypto application frontends (including non-custodial wallets) and undermines legal protections for crypto developers. Crypto lawyer Jake Chervinsky criticized the proposal, stating that it "is not regulating crypto, but banning crypto," which could undermine the bipartisan support gained by the CLARITY Act that previously passed the House with a vote of 294-134.

Zunera Mazhar, Vice President of the Digital Chamber, stated that such harsh measures would drive innovation overseas rather than address actual risks. This proposal stands in stark contrast to the bipartisan-supported Responsible Financial Innovation Act (RFIA) draft, which aims to provide more protections for crypto developers and reduce the SEC's regulatory overreach.