The Senate vote on the Clarity Act on Tuesday will determine whether the US moves closer to its first comprehensive regulatory framework for the cryptocurrency industry, although the legislation faces a serious threat from opponents on both sides of the chamber.
The Digital Asset Market Clarity Act, which runs to more than 600 pages, would divide responsibility for digital assets between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
A procedural vote will decide whether the bill can advance to debate. It requires 60 votes, meaning all 53 Republicans would need to support it alongside at least seven Democrats or independents.
Supporters say the measure would replace an uncertain system in which the approach to crypto regulation has shifted sharply between administrations. Under Joe Biden, the SEC took an aggressive stance towards the sector; under Donald Trump, the agency is led by Paul Atkins, a former industry adviser.
Ryan VanGrack, vice-chair of Coinbase, said tens of millions of Americans were investing in products without clear regulatory oversight.
“Whether you love crypto or you hate crypto, you should want it regulated,” he said. “And this is the best opportunity we have ever had to do just that.”
Why the Clarity Act faces opposition
Critics argue the bill would establish rules that are too favourable to the crypto industry without providing sufficient safeguards. They are also concerned that the smaller CFTC would receive most of the oversight, reducing the role of the SEC.
Crypto executives reject the suggestion that the arrangement is designed to avoid scrutiny, while regulators in the Trump administration have defended their approach.
Democrats have focused particularly on provisions intended to prevent presidents and other elected officials from profiting from the crypto sector while in office. They argue the proposed ethics rules do not go far enough, and object to the Department of Justice being responsible for enforcement.
The dispute has intensified after Mr Trump disclosed that he and his family earned 1.4 billion dollars last year from crypto ventures.
Republicans have proposed changes under which federally elected officials and their spouses would be barred from issuing their own cryptocurrencies. The provision could prevent Mr Trump from continuing with $TRUMP, the meme coin he launched early last year, and he has agreed to abide by that restriction.
The revised language would also require officials to divest “significant” financial interests in the crypto industry and give state attorneys general greater power to bring legal action over alleged breaches. Critics say the wording may still allow the president to avoid the requirements.
Banking sector concerns
The bill is also opposed by many banking figures, particularly community banks, over its treatment of stablecoins. The legislation would allow crypto companies to offer financial incentives, including interest payments, to customers who deposit money with them.
Bankers say that would let crypto firms compete for deposits without being subject to the same rules as traditional banks. Crypto companies argue the incentives are comparable to rewards such as cashback and points offered by credit card providers.
Rebeca Romero Rainey, president and chief executive of the Independent Community Bankers of America, said local deposits enabled community banks to fund small businesses, farmers and ranchers.
“If community banks aren’t there, and those local deposits aren’t there to fund it, who’s going to fund those small businesses and ranchers and farmers?” she said. “I don’t think it’s going to be the crypto industry.”
The House passed its version of the legislation last year, but senators have since changed it. Even if it clears Tuesday’s procedural hurdle and later passes the Senate, the two chambers would still need to agree on a final text before it could reach Mr Trump.
The timetable is uncertain, with Congress facing a busy agenda and the November midterm elections approaching. The crypto industry had hoped for quicker passage and has amassed tens of millions of dollars for the elections, but that spending has not resolved the disagreements surrounding the bill.
Senate Majority Leader John Thune scheduled Tuesday’s vote before the Senate went into recess despite the uncertain outcome. Whether the Clarity Act can secure the votes needed to proceed remains unclear.
