After a series of political victories under
President Trump, firms are lobbying Congress for a sweeping framework they helped
shape.
·
The
cryptocurrency industry is pushing for passage of the 309-page Clarity Act,
which would establish a broad regulatory framework for digital assets in the
US.
·
The
United States Senate Banking Committee is scheduled to vote on the latest draft
of the bill, a key step toward a full Senate vote later this year.
·
The
bill follows a version already passed by the House of Representatives last
summer.
·
Crypto
firms see the legislation as their most significant political objective after
securing several victories under the administration of Donald Trump.
·
Previous
industry gains include:
o Reduced regulatory enforcement,
o Business-friendly policy changes,
o Creation of a national Bitcoin reserve
framework.
·
The
legislation would make it easier for crypto companies to argue that many
digital assets are not securities subject to strict oversight by the U.S.
Securities and Exchange Commission.
·
The
bill would divide crypto oversight between:
o The SEC, and
o The Commodity Futures Trading Commission,
which is viewed as a less aggressive regulator.
·
Crypto
firms argue the bill would provide long-term regulatory certainty and protect
the industry from future crackdowns.
·
Industry
groups spent more than $130 million during the 2024 elections supporting
pro-crypto Democrats and Republicans.
·
Congress
previously passed the GENIUS Act, which established favourable rules for
stablecoins.
·
Democrats,
led by Elizabeth Warren, strongly oppose the legislation, arguing it could
weaken investor protections and financial oversight.
·
Critics
also warn the bill could benefit the Trump family’s expanding crypto ventures
and create conflicts of interest.
·
A
major dispute involves “yield-bearing stablecoins,” which allow users to earn
returns on digital assets.
o Banks fear these products could draw
deposits away from traditional banking institutions.
o Crypto exchanges, including Coinbase,
support keeping some yield-related products legal.
·
Banking
groups, including the American Bankers Association, argue the bill still leaves
loopholes that could threaten bank deposits and lending activity.
·
Earlier
Senate consideration of the bill was delayed after Coinbase withdrew support
over proposed restrictions on stablecoin products.
·
Subsequent
negotiations involving the White House, crypto firms and banking groups
produced a compromise version that restored Coinbase’s support.
·
Industry
executives say the bill is critical because future political changes could make
crypto legislation harder to pass.
·
The
Senate committee hearing is expected to include amendment debates and could
expose deep partisan divisions over crypto regulation.
Since
President Trump took office last year, the cryptocurrency industry has notched a
series of political victories, escaping lawsuits, negotiating business-friendly
policies and persuading the White House to create a national Bitcoin stockpile.
Now
the crypto world is focused on its most ambitious aim: the passage of a 309-page
bill that would create a sweeping regulatory framework for digital currencies, shaped
in part by the industry itself.
The
Senate Banking Committee is scheduled to vote on the bill’s latest draft on Thursday,
a crucial procedural step after the House approved a version of the legislation
last summer. A successful committee vote would pave the way for the bill, known
as the Clarity Act, to reach the Senate floor this year.
But
its fate is far from assured. The legislation has proved highly contentious, pitting
the crypto industry against the powerful banking lobby, with enormous stakes for
the future of financial regulation.
Crypto
executives spent tens of millions of dollars to help elect sympathetic legislators
in 2024, then descended on Washington to advocate the industry’s interests in Congress.
The result is a bill that would make it easier for crypto firms to declare that
digital currencies are not securities governed by the strict system of oversight
that applies to stocks and bonds on Wall Street.
During
discussions in Congress, Democrats have voiced fears that the bill would gut the
government’s enforcement powers over a fast-growing sector in which Mr. Trump’s
family has become a major player.
“This
bill puts investors, our national security and our entire financial system at risk
— and it will turbocharge Donald Trump’s crypto corruption,” said Senator Elizabeth
Warren of Massachusetts, the ranking Democrat on the Banking Committee, in a statement
this week.
The
bill has followed a winding path through Congress. The Senate committee was scheduled
to consider an earlier version in January, only for the giant Coinbase crypto exchange
to pull its support at the last minute, prompting legislators to cancel the vote.
The company was concerned about a proposal, pushed by the banking industry, that
would have outlawed one of its crypto products.
A
series of negotiations brokered by the White House put the bill back on track, though
banking trade groups have continued to voice concerns, arguing that the current
language would permit products that compete with traditional bank accounts.
In
interviews, crypto executives said the bill was a crucial step in making the United
States more hospitable to the industry. If control of Congress shifts in the midterm
elections this fall, it could become much harder for the industry to secure legislation.
The
vote this week is a “key window of opportunity,” said Summer Mersinger, the chief
executive of the Blockchain Association, a crypto trade group.
The
discussions in Washington cap years of lobbying and political spending by the crypto
industry.
During
the 2024 election, a network of political action committees financed by crypto firms
spent more than $130 million to try to elect Democrats and Republicans who had voiced
support for the industry. Within a few months, Congress passed the GENIUS Act, which
created industry-friendly rules for stablecoins, a type of digital currency designed
to maintain a price of $1.
In
July, with the administration’s support and a vote of 294 to 134, the House passed
its version of the Clarity Act, which granted many items on the industry’s wish
list.
At
the heart of the legislation are rules that would divide authority to police crypto
between the Securities and Exchange Commission and the Commodity Futures Trading
Commission, a smaller and less aggressive regulator.
The
industry is pushing for a framework that would shield crypto companies from the
onslaught of lawsuits and investigations that began during Mr. Trump’s first term
and escalated under President Joseph R. Biden Jr. That enforcement effort, orchestrated
by the S.E.C., was aimed at forcing crypto firms to disclose information to investors
and subject themselves to rigorous federal oversight, much like companies that issue
stocks.
Mr.
Trump ended most of the enforcement last year, a change that disproportionately
benefited companies that had donated to his political causes or forged ties with
his family’s crypto businesses. Legislation could help cement that regulatory retreat
by making it difficult for a future administration to bring comparable lawsuits.
“This
finally will create that permanent framework,” said Cody Carbone, the chief executive
of the Digital Chamber, a crypto trade group. “It gets really hard for the next
administration, whether it’s Republican or Democrat, to really change too much about
it.”
Senate
Democrats have expressed alarm. They have pushed for ethics rules to limit elected
officials from “issuing, endorsing or profiting” from crypto, a response to the
Trump family’s network of digital currency ventures. And fierce debates have erupted
over arcane subjects like decentralized finance and yield-bearing stablecoins.
“We’ll probably see a rather partisan vote,” said
Kevin Wysocki, the head of policy at Anchorage Digital, a crypto firm. “It’s quite
normal, actually, to have some points that are more contentious that need a bit
more time.”
The
legislation has faced serious resistance in the Senate.
Before
the expected committee vote in January, banking groups pushed for a significant
revision to the bill. They wanted to stop crypto exchanges from paying interest
to people who own stablecoins — a service that Coinbase offers. The banks worried
that customers would empty their deposit accounts and switch to stablecoins, a potential
threat to the banking system.
Coinbase
was not happy. “We’d rather have no bill than a bad bill,” the company’s chief executive,
Brian Armstrong, wrote on X.
After
the January vote was canceled, the White House hosted
negotiations between crypto firms and the banking industry to hash out a solution.
Coinbase appeared to be pleased with the new bill, which would allow certain forms
of yield while prohibiting others.
“It’s
clear that this is a strong compromise and a result of hard work from all parties
involved,” Faryar Shirzad, the company’s chief policy officer, posted on social
media on Tuesday. He added, “We can’t wait for the bill to move forward this week.”
But
the language remains subject to change. Banking groups have argued that it offers
too much wiggle room and would allow exchanges to “easily circumvent the prohibition.”
“Without
clear rules, there is a real risk that we see the bank deposits that drive local
lending and economic growth diverted to these stablecoin offerings,” said Brooke
Ybarra, a senior vice president at the American Bankers Association.
The
provision could be a subject of debate at Thursday’s committee hearing, which is
known as a markup because senators from both parties can introduce amendments to
the bill. And it will almost certainly face more scrutiny if the bill advances to
a vote in the full Senate.
“There’s
a lot of knowledge and learning and skill that’s gone into this,” said Stephen Gannon,
a partner at the law firm Davis Wright Tremaine who has tracked the legislation.
“Both sides have a lot to lose by not getting this across the line.”