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Senate Crypto Bill Faces Hurdles Amidst Partisan Pitches and Industry Withdrawals

Senate Crypto Bill Faces Hurdles Amidst Partisan Pitches and Industry Withdrawals

A significant legislative effort in the U.S. Senate to establish a market structure for cryptocurrencies has encountered substantial challenges. The latest draft, primarily driven by Republicans on the Senate Agriculture Committee, aims to provide regulatory clarity but is facing opposition and proposed amendments from Democrats, alongside a notable withdrawal of support from major industry players like Coinbase.

Key Takeaways

  • A Republican-led crypto market structure bill is advancing in the Senate, but lacks bipartisan support.
  • Democrats have proposed amendments focusing on consumer protection and government ethics.
  • Coinbase withdrew its support due to "fatal flaws" in the bill, particularly concerning customer rewards and SEC flexibility.
  • The Senate Banking Committee has postponed its own crypto bill markup, pivoting to housing issues.
  • Industry insiders express concern that a partisan bill may struggle to gain the necessary votes in the full Senate.

Senate Agriculture Committee's Draft Faces Democratic Amendments

The Senate Agriculture Committee has unveiled a draft crypto market structure bill, intended to provide a clearer regulatory framework for digital assets. However, the bill, initially presented without Democratic consensus, is now the subject of numerous proposed amendments from Democratic senators. These amendments aim to incorporate key policy requests, including a ban on government officials profiting from the crypto sector and a requirement for the Commodity Futures Trading Commission (CFTC) to have a full slate of commissioners before new digital asset rules can take effect. Senator Richard Durbin has proposed banning bailouts for digital asset issuers, while Senator Amy Klobuchar is pushing for a more binding quorum requirement for the CFTC. Senator Michael Bennet has introduced an anti-corruption measure to limit senior government officials' involvement in crypto.

Coinbase Withdraws Support Over "Fatal Flaws"

Major cryptocurrency exchange Coinbase has publicly withdrawn its support for the Senate's market structure bill, citing "fatal flaws" discovered in last-minute amendments. Kara Calvert, Coinbase's VP of U.S. Policy, stated that the revised draft would negatively impact everyday crypto users by effectively banning customer rewards programs and limiting the Securities and Exchange Commission's (SEC) ability to adapt to new technologies. Coinbase argued that the bill was rushed, leaving insufficient time to address these critical issues. The exchange believes these changes reflect pressure from traditional banking interests concerned about competition from stablecoin yields.

Regulatory Developments and Industry Concerns

The legislative process is complex, with two key committees, Senate Agriculture and Senate Banking, working on separate versions of crypto market structure legislation. While the Agriculture Committee's draft focuses more on commodities and aims to shield crypto developers from being treated as regulated financial firms, the Banking Committee's version deals with securities. The Senate Banking Committee has indefinitely postponed its markup hearing following Coinbase's withdrawal and a broader industry dispute over stablecoin reward provisions, opting instead to focus on housing policy. This has led to concerns within the industry that the Agriculture Committee's bill, if it proceeds without Democratic backing, may struggle to garner the necessary bipartisan support to pass the full Senate, where at least seven Democrats are typically needed for legislation to advance.

Future Outlook

Despite the setbacks, some industry figures remain cautiously optimistic that a legislative framework can still be passed before the upcoming midterm elections. The White House has reiterated its commitment to enacting a comprehensive crypto law, with an advisor stating it is a matter of "when, not if." However, the path forward remains uncertain, with ongoing negotiations and the potential for significant amendments shaping the final outcome of the Senate's crypto market structure bill.

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