‘We’re Done’: Sweeping Crypto Legislation Rejected in Senate

The crypto industry suffered a seismic loss on Tuesday when the US Senate failed to advance a bill introducing a market structure framework, with the 49 votes in favor coming up well short of the 60 needed.

The industry spent hundreds of millions of dollars campaigning for the Clarity Act. A version of the bill passed the House last year, and supporters argue the regulatory certainty it would establish will draw more investors and businesses, unleashing a new era of prosperity for digital assets.

‘It’s Over’

If passed, the more-than-600-page Clarity Act would split crypto oversight authority between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The much smaller CFTC would gain direct control over digital commodities and, crucially, rule-making power over crypto spot markets, making it the industry’s primary regulator. The bill would also introduce disclosure rules and anti-fraud and anti-money-laundering protections.

Critics, however, argue the legislation goes too easy on crypto firms, contains loopholes and lacks real safeguards. Democrats like Massachusetts Senator Elizabeth Warren wanted stricter ethics rules addressing elected officials’ crypto holdings. A group of trade associations representing US banks sent a joint letter to Senate leaders on Monday requesting changes, including the toughening of a so-called circuit breaker that would allow the Treasury Department to bar crypto firms from issuing rewards like interest on stablecoins if they cause significant amounts of money to be withdrawn from the banking system. “A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all,” the letter argues. In any case, one of the bill’s most prominent backers suggested Tuesday was the end of the road:

• Senator Cynthia Lummis, the Wyoming Republican seen as the crypto industry’s biggest champion in the upper chamber, told reporters that if the procedural vote failed, “we’re done, it’s over.” Four Republicans, including Missouri’s Josh Hawley, a noted crypto skeptic, voted against the bill. Kirsten Gillibrand, the Senate’s most pro-crypto Democrat who reportedly urged colleagues to support it, ultimately voted no.
• Bitcoin, which has experienced a late summer rally, fell 4.5% to $75,798 as of late Tuesday afternoon. Major publicly traded crypto industry companies were hit by selloffs: Coinbase fell 10.10%, Circle 11.4%, Strategy 5.3%, and Riot Platforms 6%.

Now What? The crypto industry will likely have to wait until 2027 for further attempts at comprehensive reform. In the meantime, the SEC and CFTC are undertaking their own initiatives, such as the SEC’s first proposed major crypto rule, which addresses how token issuers can raise capital. However, SEC Chair Paul Atkins said last month that he believes Congressional legislation locking in a regulatory framework that future-proofs certainty for investors “remains indispensable.”