The US Senate yesterday failed to proceed with consideration of the CLARITY Act, marking another blow for the prospect of a legislative framework for digital assets at the federal level. Senators voted 49 to 50, with the motion coming up short of the three-fifths majority needed to invoke cloture (to overcome an objection to) the motion to proceed.
Again, the four Republicans joined the Democrats, and again, the possible second consideration was left open by Senator Thom Tillis converting his vote.
Industry leaders publicly pushed back against the decision, with Coinbase CEO Brian Armstrong disappointed but confident that regulatory clarity could still be achieved through the Securities and Exchange Commission and Commodity Futures Trading Commission under their existing authority.
He further said that digital assets will continue developing regardless of congressional action, while also urging regulators to provide clarity.
Galaxy Digital CEO Mike Novogratz said that a bipartisan agreement had become ensnared in politics, but believed that the SEC or the CFTC would likely be the most immediate regulatory authority with jurisdiction.
Ripple CEO Brad Garlinghouse called the result painful after the industry’s lobbying for legislative action, saying the vote had been an opportunity to strengthen US competitiveness and consumer protections.
Opponents of the bill made further arguments; Senator Michael Bennet stated that the bill fell short on ethics provisions regarding Federal officials profiting from a crypto venture, and Senator Elissa Slotkin criticized the absence of ethics provisions, although noting the bill’s bipartisan nature could help inform the basis for future bills.
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Tillis said the failed procedural vote was not a death knell for the bill, noting lawmakers had made meaningful bipartisan progress and would continue working toward another agreement. By switching from yes to no, he was then permitted to move to reconsider the measure at a later time.
Prior to the Senate voting on the bill, negotiations on market structure, consumer protections, illicit finance provisions, and the division of regulatory authority between the SEC and the CFTC were held. According to Reuters, a new draft of the bill was released prior to the vote that made 126 changes requested by Democrats.
The defeat was also notable in crypto markets, with the price of bitcoin falling after the vote and some digital asset firms recording declines in share price. There is uncertainty about the bill’s outlook in the near term, but the failed cloture vote does not preclude the CLARITY Act.
In the meantime, regulators may feel pressure to get digital-asset rules finalized under existing authorities, and lawmakers may try to decide if re-negotiation will produce another Senate vote.
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In the months leading up to the vote, crypto groups engaged in months-long lobbying, while banking groups and some lawmakers raised concerns over financial stability, ethics and enforcement.
