- Bipartisan Senate CLARITY Act talks collapsed over ethics rules tied to the First Family and BRCA language.
- Banks and Senator Elizabeth Warren pushed for stricter limits on stablecoin reward programs.
- DeFi groups warned amendments could expand AML rules and developer liability risks.
Negotiations between bipartisan senators over the Senate’s crypto market structure bill ended Wednesday night without a final agreement ahead of Thursday’s Banking Committee markup. According to journalist Eleanor Terrett, disputes over ethics rules tied to the First Family and last-minute changes to the Blockchain Regulatory Certainty Act blocked a deal despite progress in other areas. Senator Cynthia Lummis said lawmakers agreed on “99% of the bill” before talks paused.
Ethics Debate Splits Senate Negotiators
The latest negotiations involved a small bipartisan group attempting to secure Democratic backing for the Clarity Act before the committee vote. According to Terrett, Senators Adam Schiff and Ruben Gallego pushed for stronger ethics and conflict-of-interest provisions tied to the First Family.
However, disagreements later shifted toward language connected to the Blockchain Regulatory Certainty Act, known as BRCA. The provision would shield non-custodial software developers from prosecution under money transmitter laws.
Senator Cynthia Lummis, one of the lead Republican negotiators, said unresolved issues should not block committee advancement. She warned lawmakers would face blame if another FTX-style collapse happened without federal crypto legislation in place.
As talks stalled, expectations shifted toward a largely partisan markup process on Thursday morning.
Banks And Warren Align On Yield Restrictions
Meanwhile, the crypto bill created an unusual alliance between major Wall Street banks and Senator Elizabeth Warren. According to POLITICO, banks intensified lobbying efforts over stablecoin rewards programs tied to crypto exchanges.
Banking groups argue the bill still leaves loopholes allowing crypto firms to offer yield-like products resembling interest-bearing accounts. Senators Thom Tillis and Angela Alsobrooks previously negotiated a compromise restricting stablecoin rewards tied to idle wallet balances.
Still, banks continue seeking tighter restrictions before the legislation advances further.
Warren backed tougher language this week, arguing unregulated crypto rewards programs could threaten traditional banking stability. Senators Jack Reed and Tina Smith also proposed amendments strengthening stablecoin yield restrictions.
DeFi Amendments Trigger Industry Pushback
At the same time, the DeFi Education Fund warned senators against several proposed amendments targeting decentralized finance infrastructure and developers.
The organization highlighted amendments from Senators Catherine Cortez Masto, Andy Kim, Chris Van Hollen, Elizabeth Warren, and Jack Reed. According to DEF, several proposals would expand anti-money laundering obligations and increase criminal liability risks for DeFi developers and software providers.
Other amendments would broaden the definition of financial institutions under Bank Secrecy Act rules to include digital asset businesses and developers.
Thursday’s markup now faces more than 100 filed amendments as divisions continue across both parties and the banking industry.
