Senate vote blocks crypto market structure bill
WASHINGTON – The United States Senate failed on Tuesday to advance comprehensive cryptocurrency legislation backed by President Donald Trump, dealing a major blow to an industry that has spent years and hundreds of millions of dollars campaigning for a federal regulatory framework.
The Digital Asset Market Clarity Act, known as the Clarity Act, fell short of the 60-vote threshold needed to advance most legislation in the 100-seat chamber. The vote was 49-50 in favor, with four Republican senators – Jerry Moran, Rand Paul, Josh Hawley and Thom Tillis – joining all Democrats in voting against it.
Senator Thom Tillis switched his vote from yes to no in a procedural move that preserves his ability to bring the measure back up for reconsideration later. Senate Republicans had released a new text of the bill on Sunday night in a last-ditch effort to address concerns from the banking industry and some Democrats, but opponents were not swayed.
A setback for the crypto industry
The Clarity Act aimed to create a regulatory framework for digital assets, defining how the government approaches different cryptocurrencies and blockchain projects and giving the Commodity Futures Trading Commission (CFTC) greater authority over crypto spot markets. The industry has long argued that such legislation is needed to provide legal certainty for companies making long-term plans in the US.
According to reports, the crypto industry spent hundreds of millions of dollars campaigning to advance the bill. The Age reported that the sector spent more than US$100 million (S$140 million) lobbying in support of the legislation. Its failure represents a significant setback for the industry's top policy goal.
Trump's crypto ties under scrutiny
President Trump, who has earned more than US$1.4 billion from his family's crypto ventures, had urged Congress to pass the bill. He courted cash from the crypto industry on the campaign trail during the 2024 election, calling himself a 'crypto president.'
The issue had become particularly contentious given the financial ties of the president and his family to the industry, with safeguards governing Trump's extensive crypto interests among the biggest obstacles to a deal.
Massachusetts Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, said the bill posed "massive risks to families, our national security, and our economy." She added, "If that's not bad enough, while Americans across the country suffer from an affordability crisis, this bill will turbocharge President Donald Trump's ability to rake in billions and billions of dollars from crypto."
Vermont Senator Bernie Sanders wrote on X that the bill was "corrupt," and said "Crypto billionaires have spent nearly $300M on the midterm elections" while "Trump and his family have pocketed more than $4B from crypto deals."
Democrat senator Ruben Gallego said after the vote, "All President Trump wants is time to crime." He added, "This legislation failed squarely because Republicans refuse to say no to the president."
Market reaction
The failure of the bill sent bitcoin tumbling more than 5 percent, its biggest daily percentage decline since June, as the vote appeared set to fail. Shares of crypto exchange Coinbase and stablecoin issuer Circle fell as much as 10 percent. Bitcoin's price stood at $75,939, down 4 percent over the past day, after dropping as low as $75,038 at one point on Tuesday.
According to CoinDesk, the Senate vote wasn't necessarily responsible for the entire selloff; Tuesday's trading was also shaped by investors cutting risk ahead of the Federal Reserve decision. Traditional stocks, including the Nasdaq and S&P 500, were in the red as well.
Regulators to fill the void
With the bill's defeat, the US Securities and Exchange Commission (SEC) and the CFTC are now positioned to fill the crypto policy void. However, efforts to write favorable rules for the digital asset industry could prove challenging, as industry experts have said only Congress can create a lasting regulatory framework.
SEC Chairman Paul Atkins has said new crypto rules and exemptions won't be durable without a law underpinning them. The SEC recently proposed its first major crypto rule – Regulation Crypto Assets, or Reg Crypto.
Austin Campbell, a crypto expert and former banker who is now an adjunct professor at the NYU Stern School of Business, said, "The failure puts the ball in the hands of the regulators. And while they can make rules, those are less stable and permanent than legislation."
Matthew Hougan, chief investment officer at Bitwise Asset Management, said, "If Clarity had passed, crypto would have been the consensus smart money trade in Q4."
Chris Hayes, a partner at Thorn Run Partners, said, "You might not have a Bill, and it might be less favourable to what the industry would like under Democratic control."
Coinbase CEO Brian Armstrong said the CLARITY Act didn't advance, which was a disappointment, and expects the SEC and CFTC to begin working on clear rules.