US Senate’s digital asset market rules nearing the finish line

The U.S. took a big step closer to a regulated digital asset market following a Senate committee vote, but President Trump’s crypto profiteering could yet derail this train.

On Thursday, the Senate Banking Committee voted to advance its Digital Asset Market Clarity Act (CLARITY) following two-plus hours of often heated debate over dozens of proposed amendments filed earlier this week. Crucially, the vote was 15-9 in favor, with two Democrats—Michelle Alsobrooks (D-MD) and Ruben Gallego (D-AZ)—breaking ranks to vote ‘aye’ alongside all 13 Republican committee members.

However, both Alsobrooks and Gallego stated for the record that their committee votes were no guarantee of similar approval when CLARITY reaches the floor for a vote by the full Senate. There, it will require 60 votes to pass, meaning at least seven Dems would have to vote in favor, assuming all 53 GOP senators vote in lockstep.

Following the vote, Alsobrooks acknowledged that “the digital revolution is upon us … and the truth is this digital revolution is happening with us or without us.” But “my vote today is a vote to keep working in good faith. It does not mean that I’ll be voting for the passage of the CLARITY Act on the floor because we still have so much work to do.”

Alsobrooks, who previously helped craft CLARITY’s bipartisan stablecoin ‘rewards’ compromise with colleague Thom Tillis (R-NC), singled out the committee’s failure to agree on “an ethics agreement that … would apply not only to the President and Vice-President, but to all of [Congress].” A former prosecutor, Alsobrooks, also referenced the need to “address law enforcement’s concerns about financial crimes” involving decentralized finance (DeFi) platforms. (Alsobrooks later tweeted a summary of her post-vote statement.)

Gallego signaled his intention to vote in favor of CLARITY midway through the markup session, saying that he wanted to be clear that “my vote here does not guarantee a vote on the floor.” Gallego said “serious bipartisan negotiations” had allowed “incredible progress” and “narrowed the gap on many of the outstanding issues,” but lots of work remains ahead.

Gallego noted that “perhaps the toughest issue of all” facing the Senate was “an agreement on an ethics guardrail for elected officials, all elected officials. We need real enforceable standards, what is and is not acceptable for someone who holds the public trust and shouldn’t be able to profit off an industry that they enforce or regulate. But we will continue to work.”

It’s worth noting that both Alsobrooks and Gallego previously stated that CLARITY wouldn’t get their committee vote absent strong ethics language. So it remains to be seen whether or not these latest statements regarding their floor vote intentions are more than just public posturing.

CLARITY still has a long and winding legislative road ahead before it gets to President Trump’s desk for his signature. First, it must be reconciled with the Senate Agriculture Committee’s version of the bill, which was approved in January.

From there, CLARITY travels to the House for alignment with that chamber’s version, which the House approved last summer. And if House members make alterations to the Senate-approved version, it must return to the Senate for yet another vote before finally making its way to the White House.

It was the best of times, it was the worst of times

Reaction from the crypto sector was immediate and effusive. Brian Armstrong, CEO of the Coinbase (NASDAQ: COIN) exchange, called it “a historic day for crypto and for the future of digital assets in America.” Coinbase shares opened Thursday’s trading at $201.25 but briefly soared above $222 before retreating somewhat to close at $212.01 (+5%).

USDC stablecoin issuer Circle (NASDAQ: CRCL) also got a brief boost after starting the day at $126.57, then falling below $119, then surging to over $132, before closing down 2.1% to $123.88. Regardless, CEO Jeremy Allaire tweeted that he was “thrilled” to see CLARITY making progress.

Industry association The Digital Chamber praised Banking members for their hard work but said it was “critical” that the upcoming Banking/Ag reconciliation doesn’t water down any of CLARITY’s crypto sector perks. Blockchain Association CEO Summer Mersinger called the vote “a defining moment for American leadership in the future of finance,” while agreeing that “important work still remains.”

Crypto Council for Innovation CEO Ji Kim called the vote “a decisive turning point” in America’s digital asset future, adding that he was struck by “the conviction on both sides” of the political spectrum to advance digital asset legislation.

The Coinbase-funded astroturf group Stand with Crypto (SwC) tweeted its thanks to Banking members for their “leadership and dedication” in advancing CLARITY. SwC, which earlier in the week issued a veiled threat that it would be ‘scoring’ committee members on their votes, went on to “urge Senate leaders to bring the Clarity Act to the floor for a final vote.” You know, or else.

On the other side of this divide, a coalition of banking associations issued a joint statement following the vote that said: “establishing a regulatory framework around digital assets [is] a goal the banking industry supports.” But the banks want CLARITY “strengthened further by tightening the prohibition on interest-like rewards for holding stablecoin while also allowing certain payment stablecoin transactions and activities to generate rewards … In that spirit, we will continue to work with senators in good faith to address this issue and improve the bill and its chances on the Senate floor.”

Amanda Fischer, a former Securities and Exchange Commission (SEC) chief of staff and currently director at the Better Markets consumer watchdog group, tweeted that “after years of industry insistence that crypto wasn’t under the jurisdiction of the SEC, [CLARITY] says: ‘nevermind, jk, it is!’ The law then airlifts certain securities out of the SEC regime & airdrops them into the CFTC [Commodity Futures Trading Commission].”

But as Fischer points out, “the SEC regime is designed for retail investors & the stock market, the CFTC regime is designed for institutional participants in the commodity markets.” Meaning small-time crypto buyers may not have much recourse in the wake of the failures, bankruptcies, and rug-pulls that almost certainly lie ahead.

As for the digital asset market’s reaction, the BTC token began the day at a little over $79,000, before surging to over $82,000 following the vote. But the euphoria proved short-lived, and the price was soon struggling to stay above $81,000, suggesting that much of the impact of the vote was already baked in. Other prominent tokens, including the Ethereum network’s ETH and Solana’s SOL, followed smaller but similar surge/retreat patterns.

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Does Trump look better in pinstripes or prison stripes?

These sidelined amendments addressed several contentious CLARITY subjects, including community bankers’ fears of deposit flight if alleged loopholes on stablecoin ‘rewards’ aren’t plugged, as well as law enforcement’s concerns regarding their ability to prosecute crimes involving digital assets if DeFi developers receive broad legal immunity.

Scott replied that he’d rejected only the amendments with the “most egregious” technical failures, although the chief sin of these amendments was that they addressed the CLARITY version that was issued last Friday, rather than the tweaked version that came out this week. Jack Reed (D-RI) wasn’t buying it, accusing Scott of “arbitrarily eliminating” amendments he didn’t want to tackle publicly. 

A far hotter exchange followed Chris Van Hollen (D-MD) advocating on behalf of his amendment that would “prevent conflict of interest and self-dealing by the President or members of the House or the Senate.” Van Hollen said, “We have all seen the President and members of his family involved in corrupt crypto ventures and various crypto scams.”

Van Hollen singled out World Liberty Financial (WLF) for generating “billions in profits” for the Trump family “through corrupt deals with members of the UAE royal family.” Van Hollen also referenced the $TRUMP and $MELANIA memecoins that “allowed Trump to rake in hundreds of millions if not more” while those who purchased the tokens collectively lost billions.

Van Hollen didn’t mince words, saying, “The way the scam works is that whether retail investors win or lose, Trump is the house at the casino. He always wins.”

Bernie Moreno (R-OH) pushed back on Van Hollen’s amendment, saying it called for criminal penalties and therefore it was an issue best handled by the Judiciary committee, not Banking.

But Moreno also said that he respects the legal principle of being considered innocent until proven guilty, then criticized Van Hollen for making “conclusive comments” about Trump’s alleged guilt. Moreno said that “to say with no knowledge that [Trump] is committing a crime is a disgrace,” and he bemoaned Van Hollen making “ad hominem attacks against the President.”

Van Hollen retorted that the WLF/UAE deal “has all the markings of a corrupt deal,” but Scott countered that “Moreno’s point is spot on” and “we should be very careful in this context.” Van Hollen said his amendment “doesn’t pass judgment” on Trump, but Scott cut him off, saying “your comments did, not the amendment.” And with that, Scott halted further debate and called for a vote on the amendment (which Van Hollen lost).

The subject came up again as Raphael Warnock (D-GA) withdrew his amendment to enact greater consumer/investor protections. Warnock commented that “the President’s self-dealing with digital assets is pure corruption and everyone in this room knows that.”

Warnock noted that Trump has pushed for CLARITY’s passage, but “he should decide whether he wants to get this done or whether he wants to continue to enrich his family.” Warnock said Democrats “have made it clear since the beginning of this process that we will not accept a crypto bill that allows the president’s crypto corruption to continue.”

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US voters don’t care about candidates’ crypto stance

Stand with Crypto plans to score senators’ floor votes on CLARITY, and with crypto-focused political action committees (PAC) holding nearly $200 million to spend on November’s midterm elections, crypto operators hope senators get the unsubtle message.

Typically, ads produced by the Coinbase-backed Fairshake PAC that either support one candidate or attack that candidate’s opponent never mention crypto, blockchain, tokenization, or anything else that might inform viewers that the ad they’re watching is paid for by crypto operators. A recent set of surveys goes a long way towards explaining why.

Crypto operators have long touted the alleged existence of ‘crypto voters’ in pressing for favorable regulatory/legislative actions. But a new Politico survey released this week found that only 4% of Americans weigh a political candidate’s stance on crypto when deciding whom to vote for.

The news didn’t come as a shock to Sen. Lummis, who told Politico that the issue was “still too new” for voters to care. Sen. Tillis agreed, saying voters “don’t care” about crypto, adding that “for people who grew up like me, I hope to God they’re not talking about crypto right now. Get a savings and loan account and try and get some minimum guaranteed return, period.”

Rep. Dusty Johnson (R-SD), a member of the House of Representatives’ Agriculture committee, shares the view that “most voters don’t care about digital assets. But those who do care a lot. It is a high-intensity issue.”

Asked to choose from a list of “legislative priorities” they’d like to see Congress tackle, just 18% of survey respondents chose “establishing rules [pro or con] for the cryptocurrency market.” That ranks the issue fifth, while twice as many respondents chose “protecting consumers from financial fraud.”

Asked whether the government “should crack down on the cryptocurrency industry, even if it becomes less profitable,” 45% agreed, while 25% said the government “should take steps to legitimize crypto, even if that means less regulation of the industry.” The remaining 30% didn’t know which stance they favored.

As for that thorny ‘ethics’ issue, a majority (55%) of respondents believe “politicians who write rules governing the crypto industry should not be allowed to hold personal investments in cryptocurrency.” Just 18% found this situation acceptable.

Asked for their top three reasons why voters “have not invested more in cryptocurrencies,” 31% said “too many scams and fraudulent schemes,” 27% found it “too volatile and unpredictable,” 17% said “the people promoting it cannot be trusted,” 15% said they “don’t know how to use it or find it hard to use,” 13% said it was because crypto “is mainly used for illegal activity” and 12% said they knew people who’d “lost money on it.”

On the less pejorative side of this question, 28% said they “have no spare money to invest,” 17% said they were “not interested in investing in general,” while a mere 9% said they had “no concerns about investing in cryptocurrency.”

Asked whether the government should take action “to legitimize cryptocurrencies as mainstream financial assets, 31% are against the idea versus 27% who support it. As for whether the government should invest its reserves into digital assets, 37% either oppose or strongly oppose, versus 23% who are in favor. Regarding the government issuing a central bank digital currency (CBDC), 25% are in favor, while 37% are opposed.

This latest survey builds on previous Politico polling that found a bipartisan majority of Americans think deep-pocketed special interest groups exert way too much influence on legislative matters. Other surveys have found that voters don’t trust crypto operators with their money and don’t trust Trump to oversee crypto matters.

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