Efforts to advance the market structure bill in both the Senate Banking Committee and Senate Agriculture Committee underscored the gap that remains between Republicans and crypto-friendly Democrats on key issues after months of negotiations, while an intractable dispute between the crypto and banking industries has further complicated the push.
"We're in a midterm election year. The legislative window is going to close early," said Brian Gardner, chief Washington policy strategist for the wealth management and investment banking company Stifel.
"With a lot of issues yet to be resolved on the bill and it lacking bipartisan support in the Senate …. I don't think anybody can say that the prospects are overwhelmingly good for the bill to pass this year," he added.
Republican leaders on the Senate Banking and Agriculture committees sought to move the legislation forward in January despite failing to secure buy-in from their Democratic colleagues.
Both committees are involved in drafting the market structure bill, which seeks to clearly split regulatory authority over crypto markets between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Senate Banking Chair Tim Scott (R-S.C.) and Senate Agriculture Chair John Boozman (R-Ark.) initially scheduled markups for the same day in mid-January.
While Boozman later rescheduled, citing progress in bipartisan talks, Scott appeared set to move forward with the markup as planned.
He released an updated draft of Senate Banking's portion of the bill just days before the meeting. The draft, which still lacked Democratic support, immediately spurred pushback from the crypto industry over a controversial stablecoin provision.
The dispute stems from the GENIUS Act, a stablecoin framework passed by Congress last July. The measure included a provision barring stablecoin issuers from providing interest to their customers solely for holding the dollar-backed digital tokens.
Since its passage, the banking industry has argued the GENIUS Act left open a "loophole" that allows third parties to offer rewards to stablecoin holders and urged lawmakers to close it in the market structure bill.
The crypto industry has fought back hard against the banking effort, contending that stablecoin rewards are necessary to allow the industry to effectively compete. This has resulted in dueling lobbying efforts.
When the new Senate Banking draft was released featuring language that would bar digital asset providers more broadly from offering rewards to stablecoin holders, the crypto world roundly criticized the provision.
The final straw appears to have been Coinbase, which pulled its support the night before the markup. It cited several concerns, including the stablecoin rewards provision. Within hours, Scott indefinitely postponed the markup.
The Senate Banking Committee is now shifting its focus to housing legislation and is expected to return to the market structure bill in late February or March, according to Bloomberg.
Meanwhile, the White House is stepping in, meeting with members of both the crypto and banking industries Monday amid the stablecoin rewards dispute.
Check out the full report at TheHill.com tomorrow.
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