Summary
- The Clarity Act is set for its initial Senate vote today, requiring 60 votes to proceed; Republicans assert their latest proposal includes significant concessions on ethics, developer protections, and introduces a new stablecoin "circuit breaker."
- In response, Democrats submitted a counterproposal on Monday, calling for stricter ethics regulations and modifications to the Blockchain Regulatory Certainty Act, leading Republicans to accuse them of "moving the goalposts," while the White House seems uninterested in further discussions.
- The vote's outcome is politically charged, with some Republicans hesitant due to bank concerns, although Mitch McConnell's return may bolster support.
Good morning from Washington, D.C., where the Clarity Act is poised for its significant Senate vote later today.
This legislation requires a total of 60 votes to invoke cloture and proceed with formal debate, a milestone achieved after over a year of negotiations and more than five years of efforts by Congress to establish a comprehensive framework for the crypto market.
Myriad: Will Congress pass the Clarity Act? Make your prediction here.The vote is scheduled for 2:15 p.m. ET, following the release of an updated draft by Senate Republicans on Sunday night. They claim this version incorporates major concessions regarding ethics, protections for software developers, and the agricultural title, along with a newly introduced “circuit breaker” designed to mitigate concerns that stablecoin yields could lead to deposit outflows from community banks.
According to Republicans, the latest draft includes 126 significant amendments made in response to Democratic requests.
Democrats Demand More Changes
Late Monday, Senate Democrats presented a counterproposal addressing the revisions made by Republicans, as reported by sources familiar with the discussions. This counter does not propose changes to the stablecoin yield provisions, which have been characterized as a concern primarily for Republicans.
On ethics, Democrats are pushing for stricter regulations concerning large crypto holdings, paid promotions in crypto, and the involvement of dependent children. For the Blockchain Regulatory Certainty Act, they are advocating for more precise language to clarify that it does not alter criminal law, while their amendments to the agricultural title aim to impose stricter rules on exchanges and conflicts of interest, along with protections for Tribal gaming laws.
Republicans Respond
In a statement, Jeff Naft, spokesperson for the Senate Banking Committee, criticized Democrats for allegedly shifting their demands. “Republicans have introduced 126 substantial changes at the request of Democrats, including significant modifications to address their ethics concerns. Yet, we continue to hear unreasonable demands and a refusal to accept progress. The final text is available for review,” he stated.
This new counteroffer comes after remarks from key Senate Democrats, such as Mark Warner (D-VA), Ruben Gallego (D-AZ), and Raphael Warnock (D-GA), who indicated that the ethics proposal previously endorsed by President Trump still requires revision. Senator Elizabeth Warren (D-MA) has voiced more severe concerns, suggesting that the updated ethics language grants too much authority to Trump administration officials over enforcement and creates loopholes that could permit the president to profit from his crypto holdings.
Senator Catherine Cortez Masto (D-NV), who has been a prominent figure in Democratic negotiations over the Blockchain Regulatory Certainty Act, is reportedly behind the additional modifications, despite facing pushback from both the industry and Congressional Republicans regarding previous concessions made to address her issues, including the removal of explicit criminal protections.
It remains uncertain whether Senate Republicans, who labeled the text released on Sunday as their “last, best and final” offer, will consider further amendments before the vote or inform Democrats they must vote on the bill to pursue additional changes.
Patrick Witt, Executive Director of the White House Crypto Council, indicated on Monday that the administration shows little interest in further negotiations. “If there are any changes left, they are likely to be trivial or technical in nature,” Witt commented. “I consider this a definitive best and final offer.”
Senator Kirsten Gillibrand (D-NY) has been quietly encouraging her fellow Democrats to support the bill to facilitate further negotiations on the Senate floor, as reported by Politico.
Banking Lobby Stands Firm
Eight banking trade organizations, including the American Bankers Association and the Independent Community Bankers of America, criticized the new text on Monday, asserting that the deposit flight “circuit breaker” introduced by Republicans is “not a safeguard at all” since it would only activate after significant deposit flight has already taken place.
This circuit breaker would serve as a backstop, allowing the Treasury Secretary to intervene if there is evidence of a significant transfer of deposits from community banks to stablecoins.
In a letter addressed to Senate leaders, these groups reiterated their call for stricter regulations on stablecoin rewards to eliminate what they describe as loopholes that might still permit interest-like payments on stablecoin holdings.
White House Pushback
This morning, the Council of Economic Advisers launched a new interactive tool allowing users to evaluate the banking industry's argument regarding deposit flight. This initiative builds on previous analysis from the CEA, which found “no meaningful relationship between the growth of stablecoins and deposit flight from community banks.”
Witt expressed strong sentiments regarding the banking sector's objections on Monday, stating that Republicans have already made considerable efforts to address their concerns, including the introduction of the circuit breaker. “If you oppose the Clarity Act simply because you dislike crypto, just admit it,” Witt remarked, questioning the “good faith nature” of the banks' ongoing resistance.
This persistent opposition could impact the Republican vote count.
Some Senate Republicans are still undecided due to the banking industry's apprehensions regarding the stablecoin yield provisions. Senator John Curtis (R-UT) indicated he would support the bill this afternoon but remains opposed to its final passage due to the banks’ concerns. Senators John Cornyn (R-TX) and Susan Collins (R-ME) also mentioned they are deliberating their votes.
A possible advantage for Republicans in securing votes comes from Senator Mitch McConnell (R-KY), who returned to the Senate on Monday night after being absent for three months. McConnell stated in a post on X, “I will do my utmost to be present for crucial votes when our Conference needs me.”
Today's vote on the Clarity Act could indeed be one of those crucial moments.
Witt expressed optimism about the vote's outcome but acknowledged that it may hinge more on political dynamics than the bill's content. “The ability to secure 60 votes will likely depend on political calculations rather than policy considerations,” he remarked.
Crypto in America is a newsletter authored by Eleanor Terrett. Click here to read the full article and subscribe.