U.S. Senate blocks crypto market structure bill amid ethics dispute

Traders Union
All News
Financial News
Senate blocks crypto bill

Highlights

U.S. Senate blocks the Clarity Act with a 49-50 vote, failing to secure the 60 votes needed to advance the digital assets regulatory framework.
Bitcoin drops 3 per cent post-vote and is down 35 per cent year-on-year, as the crypto sector faces rising political and market pressures.
More than $260 million raised by the Fairshake Super Pac fails to secure bipartisan crypto legislation, leaving future policy to federal agencies and international competitors.

Senate vote derails long-sought crypto framework

As first reported by Financial Times, the so-called Clarity Act fails to advance in the Senate after Democrats press for tighter limits on Donald Trump’s ability to profit from crypto businesses and for stronger protections around stablecoin yields.

The vote stands at 49 in favour and 50 against, well below the 60 votes needed to move the measure forward. The bill is designed as a first-of-its-kind regulatory framework for digital assets, and the crypto sector sees it as a way to avoid the tougher enforcement approach pursued during the Biden administration.

Ruben Gallego, a Democratic senator from Arizona involved in the talks, says the legislation fails because Republicans will not break with the president. The White House concedes some Democratic demands in the final stretch, but not all of them, leaving ethics concerns unresolved.

Another major dispute centers on whether stablecoin issuers should be allowed to offer yields to customers. Banks oppose that provision, arguing it could draw deposits away from the traditional banking system and weaken lending capacity.

Industry faces political and market pressure

The defeat marks a major blow for crypto companies that spend more than a year negotiating and commit record lobbying sums to secure a favourable framework from a Republican-controlled Congress. It also undercuts Trump’s stated goal of making the country the “crypto capital of the world.”

Bitcoin falls 3 per cent after the vote fails, and the token is down 35 per cent over the past year as retail investors shift attention toward volatility in AI stocks and broader equity markets. With Democrats expected to gain more political power in November’s midterm elections, crypto groups now confront the risk of a less supportive policy climate.

For now, the industry is likely to focus on federal agencies that oversee securities and derivatives, which can still shape crypto policy through rulemaking. Kristin Smith, president of the Solana Policy Institute, says pro-crypto groups will also push for the Senate to reconsider the bill.

Major crypto backers including Andreessen Horowitz, Ripple Labs and Coinbase support the Fairshake Super Pac, which raises more than $260 million for the 2024 elections and holds more than $100 million at the end of July, according to the latest federal filing. Even so, that financial backing does not secure the bipartisan support needed to pass the legislation.

The stablecoin fight also exposes tensions between the crypto sector and banks, from large institutions to community lenders. Banking trade groups say lawmakers should build a durable digital asset framework while protecting bank lending that supports economic growth, while crypto advocates reject the argument and warn the failed vote could leave future global standards to Brussels or Beijing instead of Washington and New York.

Our earlier coverage of the Senate’s procedural vote on the CLARITY Act explained that the setback did not end the broader effort to create a federal market-structure framework for digital assets. We noted House leaders were reaffirming that only Congress can provide lasting legal certainty, while regulators may still shape interim rules as lawmakers continue negotiations.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.