CLARITY Act Faces Critical Senate Vote as 309-Page Crypto Bill Hits Roadblock, Over 100 Amendments Filed and Bipartisan Negotiations Collapse Ahead of Key Committee Markup on SEC, CFTC, Stablecoins, Bitcoin Regulation, and Blockchain Developer Protections
Negotiations on the Digital Asset Market CLARITY Act stalled just hours before the Senate Banking Committee’s markup. The collapse of overnight talks has made it more likely that the bill will come to the floor for a vote largely on partisan lines instead of the bipartisan breakthrough many industry leaders had hoped for.
The CLARITY Act is a wide-ranging bill on the crypto market structure of 309 pages and is the most comprehensive legislation introduced in the US Senate to date.
The bill aims to establish clearer jurisdiction between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), as well as establish guidelines for digital asset exchanges, brokers, stablecoins, blockchain developers, and self-custody protections.
Major Regulatory Framework for Crypto Markets
One of the major elements in the legislation is defining Bitcoin as a digital commodity regulated by the CFTC. However, if the decentralization requirements in the proposal are met, Ethereum might also be subject to CFTC jurisdiction.
The bill also tightens the rules for stablecoin issuers, mandating that they back each dollar of stablecoin with a dollar in cash or US Treasury securities.
Additionally, the bill would allow banks to directly custody digital assets, a move viewed by many analysts as a notable step toward institutional crypto adoption in the US financial system.
The proposal also incorporates protections for non-custodial software developers and blockchain infrastructure providers from being prosecuted under money transmitter laws outlined in the Blockchain Regulatory Certainty Act (BRCA).
Overnight Negotiations Break Down
A small bipartisan group of senators spent the evening trying to close the remaining gaps but ended without agreement, according to journalist Eleanor Terrett.
There were two major issues that caused the negotiations to fall apart overnight.
The first involves ethics and conflict-of-interest provisions tied to the First Family and political figures involved in crypto-related businesses. Democrats, including Adam Schiff and Ruben Gallego, were pushing for stronger compromise language before supporting the bill.
According to Terrett, progress was reportedly made on the ethics side during negotiations. The second and bigger issue involved concerns around the Blockchain Regulatory Certainty Act (BRCA).
The BRCA provisions are meant to stop non-custodial software developers and blockchain infrastructure providers from being prosecuted under money transmitter laws.
Senator Cynthia Lummis admitted that a lot of the bill had already been settled. She said the bill is 99% agreed upon and urged colleagues across the aisle to resolve the outstanding issues after the committee vote. She warned that failure to pass the legislation leaves the industry exposed to another FTX-style collapse with no regulatory framework in place.
Also Read: XRP Sees Fresh Hope as CLARITY Act Section 105 Nears Key Senate Vote
Crypto Industry Pushes for Passage
The crypto industry has strongly endorsed the bill, which comes as a boost for firms looking for regulatory certainty amid the industry’s uncertainty.
“Millions of Americans are already in this market, and they deserve to be treated as they would be treated in every other asset class,” said Ripple CEO Brad Garlinghouse.
Over 100 amendments were reportedly filed before the markup session, putting pressure on lawmakers as the committee vote nears. The bill would still need 60 votes on the Senate floor before being approved.
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