Crypto chaos has returned to the U.S. Senate.
Bipartisan talks over a bill overhauling how cryptocurrencies are regulated have stalled, jeopardizing the legislation’s path forward this year.
Pro-crypto Senate Republicans have been rushing to pass a market-structure bill before the end of this year, but they have struggled to attract the bipartisan support necessary to pass the legislation. Negotiations hit a major snag on Thursday after Republicans pressed Democrats to agree to a committee vote in the coming weeks and objected to proposed changes that they circulated.
The clash is the latest twist in a saga over how to regulate digital assets, which has long been acrimonious. Republicans and Democrats are now publicly trading barbs over this week’s dispute.
A spokesperson for Senate Banking Chair Tim Scott, Jeff Naft, said in a statement Thursday that Democrats’ proposal for how to regulate decentralized finance in the bill “was not a legislative offer,” adding that “the document was not written in legislative text, included multiple incoherent policy ideas, and was not a good-faith effort to engage on market structure.”
A spokesperson for Sen. Ruben Gallego, the top Democrat on the Senate Banking subcommittee on digital assets, said that “Democrats have shown up ready to work but our Republican counterparts are crashing out.”
“They asked for paper and substance, and we delivered,” said the spokesperson, Jacques Petit. “They then turned around and leaked our proposal and pretend to be surprised that our parties have policy differences.”
Congress passed a separate crypto bill earlier this year. But while that bill was focused on one narrow slice of the crypto universe — so-called stablecoins that are pegged to the value of the dollar — the market-structure measure is significantly more complicated and controversial. It would divvy up oversight of digital assets between the SEC and CFTC, two government bodies that regulate financial markets.
Republicans — and parts of the crypto industry — object to parts of the plan that Democrats circulated this week. Blockchain Association CEO Summer Mersinger said in a statement Thursday that “the disappointing proposal outlined by Senate Democrats would effectively ban decentralized finance, wallet development, and other applications in the United States — an outcome that’s neither workable nor consistent with American innovation.”
But senators are also at odds over the process for negotiations.
Senate Banking Republicans, who initially vowed to mark up the market-structure bill in September, have pressed Democrats to agree to a date for a committee vote on the bill. But the Democrats involved in the talks have balked at those requests, saying lawmakers need to agree to a bipartisan authorship process and take time to negotiate a bill that has broader support than what Republicans have released.
After Democrats shared their DeFi proposal this week, which was previously reported by Punchbowl News, Senate Banking GOP Staff Director Catherine Fuchs wrote in an email to Democratic staffers involved in negotiations that was obtained by POLITICO: “I have talked to the Chairman, and until we have an agreed upon date for markup we are going to pause any further meetings.”
Naft, the Scott spokesperson, said that “Banking Committee Republicans are eager to work with Democrats on market structure.”
“We have repeatedly asked for legislative feedback on our draft since June 27th, and they have not offered any formal, substantive feedback on either of our discussion drafts,” he said. “Also, the Chairman, in hopes of bipartisan engagement, pushed the September 30th markup date and has asked multiple times for his Democrat colleagues to commit to a markup date. They have yet to commit to a markup date, which is necessary in order to move this legislation forward.”
“Leaking private communications during market structure negotiations should tell you everything you need to know,” he added. “It shows one side is more focused on political narratives than serious work.”
Petit, the Gallego spokesperson, said Republicans’ “demand to set a markup date before text is agreed to is like setting a wedding date before the first date.”
“It’s nonsensical,” he said. “But this is likely the best they can do to distract from the fact that their caucus is not unified on this issue. Regardless, the 12 Democrats remain committed to negotiating in good faith if and when Banking majority staff determines that they truly want a bipartisan product.”
Gallego is one of a group of a dozen crypto-friendly Senate Democrats who have been negotiating the bill. Other key Democrats involved include Sen. Kirsten Gillibrand of New York, Mark Warner of Virginia, Angela Alsobrooks of Maryland and Cory Booker of New Jersey. They say they want to come to a deal on the bill, despite more fundamental objections from other members of the party — like Senate Banking ranking member Elizabeth Warren of Massachusetts — who warn that crypto is a risk to financial stability and national security.
“We’re going to continue working,” Gallego said in an interview late Thursday. “We’re not going to be pushed to set an artificial deadline for a vote. But we are still in the fight to make sure we have a bipartisan market-structure bill.”
