- Senators from both parties raised concerns about a proposed crypto market structure bill in a Senate Banking Committee hearing.
- Lawmakers questioned whether the crypto industry should have influence in writing regulations that would govern itself.
- Democrats said the House’s CLARITY Act, set for a vote soon, contains potential loopholes and risks to the economy.
- Some senators warned that the current bill could allow certain digital assets or decentralized finance (DeFi) to bypass SEC regulations.
- Requirements like restrictions on presidential crypto activities are points of contention that may impact whether the bill can pass.
Senators discussed a proposed cryptocurrency market structure bill during a Senate Banking Committee hearing on Wednesday in Washington, D.C. Members from both the Republican and Democratic parties expressed skepticism and concern, as the bill could create the first official framework for trading and issuing most crypto assets in the United States.
Senator John Kennedy (R-LA) questioned the idea of allowing the crypto industry to help write its own regulations. He addressed industry leaders like Ripple CEO Brad Garlinghouse and said, “To what extent should we allow you to draft [these rules]?” Kennedy criticized past industry self-regulation, adding, “what we got as a result looks like somebody knocked over a urine sample.”
Other lawmakers, including Democrats, voiced that the current House bill—the CLARITY Act—could create broad exemptions. Senator Tina Smith (D-NM) pointed to sections that could exempt digital assets classified as collectibles or art from SEC oversight, stating, “This seems to me like a loophole you could drive a truck through, and I don’t think that is an accident.”
Senator Elizabeth Warren (D-MA) focused on whether the legislation might allow traditional financial institutions to offer tokenized versions of stocks or assets on blockchain networks that would avoid SEC regulations. Former CFTC chair Timothy Massad replied, “Yes, it certainly could.” Massad further noted that, if DeFi were exempt under the new law, someone could tokenize an existing stock like Tesla and trade it outside standard financial rules.
Warren outlined that her support for a crypto bill would require strong anti-money laundering measures and restrictions on crypto activity for the president and vice president while in office. These demands arise amid reports of President Donald Trump’s lucrative involvement in the crypto sector, a topic that has divided lawmakers.
The bill’s fate may depend on moderate Democrats who recently supported the GENIUS Act, the nation’s first stablecoin regulation, despite lacking similar presidential restrictions. Senator Raphael Warnock (D-GA) stated during the hearing, “I agree that President Trump’s crypto corruption distorts the digital asset marketplace…Writing a bill with a corruption caveat for the president sends a clear message: that Congress is not serious about addressing corruption.”
Additional debate is expected as the House prepares to vote on the CLARITY Act next week. The outcome may rest on whether more Democrats insist on stronger language regarding presidential involvement in crypto markets.
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