Reports indicate that legislation on crypto market infrastructure has been delayed. The bill had been scheduled for a markup hearing tomorrow (January 15th) at the Senate Banking Committee, but following criticism from Coinbase and a statement that they no longer support the bill, Senator Cynthia Lummis stated the bill should be pulled, according to Bloomberg. While Senator Lummis recommended delaying the bill, the decision was announced by Senator Tim Scott, Chairman of the Senate Banking Committee.
Losing the support of a key constituent, such as Coinbase, undermines the legislation’s credibility. Reports indicate that bank lobbyists, along with certain policymakers, have insisted on changes or proposed amendments that harm the legislation’s intent.
Prominent venture capitalist and digital asset investor Tim Draper agreed with Coinbase CEO Brian Armstrong’s displeasure with the legislation. Draper stated on X:
“Brian Armstrong makes sense here. The current Senate compromise is worse than no bill at all. Sounds like the banks have been meddling.“
Bitwise Head of Research, Ryan Rasmussen, bulleted out his opinion on the shortcomings of the bill:
“The current draft of the CLARITY Act is bad for…
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- Tokenization
- Stablecoins
- DeFi
- Privacy
- Builders
- Users
- Investors
- Innovation
We’d rather have no bill than a bad bill.”
Meanwhile, some crypto insiders insist that perfect should not be the enemy of good and prefer to move legislation forward even if it falls short of some industry participants’ expectations.
Arjun Sethi said he and Kraken, a top crypto exchange, remain fully committed to the bill and are supporting efforts to advance it.
“It has taken many years of sustained bipartisan work to get to this point across administrations, market cycles, and shifting political dynamics. It is easy to create deadlines. It is easy to declare failure. It is easy to walk away when a process gets difficult. What is hard and what actually matters is continuing to show up, working through disagreements, and building consensus in a system designed to require it.
Market structure legislation is, by definition, complex.”
He believes that walking away from the bill would “lock in uncertainty” and leave companies operating “under ambiguity” while the rest of the world moves forward.
Ripple founder Brad Garlinghouse concurred. He said that while the legislation was long overdue, the bill is a victory:
“This move by Senator Tim Scott and [the Republicans on the Banking Committee] on market structure is a massive step forward in providing workable frameworks for crypto, while continuing to protect consumers. Ripple (and I) know firsthand that clarity beats chaos, and this bill’s success is crypto’s success.”
Galaxy CEO Mike Novogratz was more diplomatic:
“While the crypto bill might be delayed to keep working on it, I am very confident that a bill will get done soon. I have spoken to over 10 senators on both sides of the aisle in the past 24 hrs and I believe they all are working in good faith to get something done. Always gets tense at the end.”
Beyond establishment bank lobbying to change the bill in their favor, the biggest problem is garnering the support of Senate Democrat skeptics. Some have been steadfastly anti-innovation and anti-digital asset.
Galaxy Head of Research Alex Thorn pointed at Democrat Senator Elizabeth Warren, a member of the Senate Banking Committee, as a key detractor of the legislation. He stated that Senator Warren had filed 38 amendments that will:
- “Remove developer protections
- More sanctions compliance obligations
- More illicit activity powers for the government
- More AML obligations for DeFi, front ends
- Repeal positive OCC guidances for banks
- gut SEC’s ability to allow tokenization.”
The lines have apparently been drawn between the pro-banking industry/anti-innovation group and the pro-digital asset/pro-innovation members. As the legislation may emerge as the most dramatic change to the financial services sector since the ’33 and ’34 Act, it should come as no surprise that intense disagreements have emerged. Incumbent banks are terrified of competition and are doing their best to halt or slow it down. At the same time, policymakers should focus on enabling pro-consumer innovation while setting rules to protect the public, without going so far as to suffocate the digital asset industry at its genesis.