Crypto market structure legislation, which aims to establish which financial regulator will oversee different portions of the industry, seemed to be inching forward in the upper chamber.
However, progress screeched to a halt this month after a Democratic proposal for a portion of the bill was leaked, provoking sharp industry backlash and derailing talks between Republicans and crypto-friendly Democrats.
Negotiations are at a standstill, with Capitol Hill preoccupied by the government shutdown, which threatens the chances of passing the bill by the end of the year.
Senate Democrats and Republicans are poised to separately meet with crypto executives Wednesday in what appears to be an effort to get the ball rolling again.
"I think there are a few very strong champions that are working really hard to try to get this done," Kristin Smith, president of the Solana Policy Institute, told reporters last week. "I'm not sure the rest of Congress is there, so I think it's an uphill battle in the short term."
Lawmakers have struggled for nearly a decade to figure out how to regulate cryptocurrencies, which often straddle the lines between several types of financial products overseen by different agencies.
The crypto industry has long sought legislation to draw lines between oversight by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
The House passed its version of the market structure bill, the Digital Asset Market Clarity Act, in July. In the following months, the Senate has sought to forge ahead with its own legislation.
Republicans on the Senate Banking Committee released a discussion draft of their portion of the bill shortly after the Clarity Act cleared the lower chamber.
In early September, a group of crypto-friendly Senate Democrats offered up a framework laying out their views on key issues, teeing up negotiations.
Talks hit a snag in early October, when Senate Democrats sent over what a staffer described as a "starting position" on decentralized finance regulations. The proposal, which was leaked to the press, faced swift backlash from the crypto industry.
"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," Blockchain Association CEO Summer Mersinger said in a statement.
"The language as written is impossible to comply with and would drive responsible development overseas," she added.
Check out the full report at TheHill.com tomorrow.
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