DeFi, ethics disputes remain in Senate crypto bill ahead of Jan. 15 vote

The U.S. Senate Banking Committee is inching closer to agreement on a bipartisan crypto market structure bill, with a vote next week, its chairman said, as industry insiders prepare for a blitz of the Senate offices on Thursday.

Republicans on the committee are exhibiting wide confidence that their finish line is near on the lengthy negotiations over a bill to set up regulated crypto markets in the U.S. However, Democratic negotiators haven’t broadly weighed in on the rapid timeline that committee Chairman Tim Scott said will conclude with a January 15 markup hearing. A document that emerged from the Tuesday meeting, first reported by Politico, shows that while the main sticking points are still in place between the parties, numerous Democratic requests have been incorporated.

Many of the key issues Democrats had with the market structure bill as far back as last spring, when lawmakers were negotiating stablecoin legislation, still seem to be under discussion, including ethics, how yield is treated, how money transmitters are addressed, the role of the U.S. Treasury Department in policing crypto and developer protections.

“I think it’s important for us to get on the record and vote,” Scott said in an interview with Brietbart published on Tuesday. “So, next Thursday, we’ll have a vote on market structure. We have worked tirelessly for the last six-plus months making sure that we had multiple drafts available to every member of the committee.”

Everybody agrees there are a number of major provisions that haven’t been worked out between the parties, as explicitly illustrated in the document that emerged from the meeting, including the ethics demands made by Democrats based on President Donald Trump’s personal crypto ties.

However, what it also shows is item after item of Democratic requests that were satisfied during the talks. They include illicit-finance points that reflect input from the Treasury Department, and a number of provisions were copied over from the House of Representatives’ Digital Asset Market Clarity Act.

“There is motivation from both Republicans and Democrats to get this done,” said Cody Carbone, CEO of the Digital Chamber, in an interview with CoinDesk on Tuesday. “So I think there is a hope that even if there is not 100% agreement on a bill, that there is enough support to continue to move this forward.”

Still ways to go

Scott’s long-awaited markup is a massive procedural step that would turn the corner from proposed legislation to a bill moving through the actual approval process. Since the House already passed its similar Clarity Act last year, a Senate version would complete the package that could — if approved — end up on Trump’s desk.

However, a lot has to happen before then. First, the committee has to go through this markup. Then, a matching process has to happen in the Senate Agriculture Committee, which has its own significant jurisdiction over the crypto arena and a leading regulator of the sector, the Commodity Futures Trading Commission.

Carbone argued that a markup at this stage could better define the final points the Democrats and Republicans need to work out before the final vote. Other industry lobbyists are more reserved about counting on a successful markup, suggesting that Democrats may strenuously resist moving forward before some of their central demands have been addressed.

He said the industry is counting on the group of Democrats that’s stayed at the negotiating table. Carbone says he’s optimistic they’ll keep the process moving, even though the committee’s ranking Democrat, Senator Elizabeth Warren, would be expected to remain in the vocal opposition.

The Agriculture Committee has trailed its banking colleagues markedly during this process, though its members tend to move better in bipartisan action than Scott’s committee. Once the banking panel acts, those working on the bill think the other committee will follow in the coming weeks.

Here’s what would still have to happen:

• Once both committees do the markup — a process in which amendments are introduced and debated — the panels vote on whether to advance the legislation.
• If committees pass that step, their two distinct legislative drafts are mashed into one bill for a vote of the overall Senate.
• If the bill clears that major hurdle, it goes back to the House, where it’s expected to be approved by a wide, bipartisan margin like the similar Clarity Act before it.
• Then, a Trump signature would make it law.

Lobbying pressure

The crypto industry has had its say at several points along the way in the lengthy negotiation, including last month when industry leaders were invited to meet with senators before the holiday break in December.

But the Digital Chamber is organizing a final push this week, flying in executives and other digital assets leaders to flood the Senate offices on Thursday, explaining how important they think this process is.

“We are blanketing the Senate, meeting with as many Senate offices as possible,” Carbone said. “And the goal is to bring a very diverse group of industry participants to answer any possible questions they have on the market structure bill.”Executives from Binance.US, Unicoin, Anchorage Digital, Crypto.com and Hedera are expected to participate, among many others.

The industry representatives have been careful, though, not to say whether they support the current legislative draft, because it includes vital provisions that haven’t been worked out completely — including the treatment of decentralized finance (DeFi) and the question of stablecoins offering yield or rewards.

Many crypto insiders have suggested that a failure to satisfy worries about DeFi oversight could still tank the industry’s support. Carbone said there have been “real, substantive, bipartisan progress on DeFi.”

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