Senate Democrats are preparing a counterproposal to the CLARITY Act before a key procedural vote on September 15. The revised crypto market structure bill still lacks broad agreement, despite new Republican concessions on ethics, state enforcement, and stablecoin rewards.
Democrats were not ready to support the latest draft on Monday. Senator Mark Warner said his party had a counteroffer, while ethics rules remained the main concern. The Senate is scheduled to vote at 2:15 p.m. ET on whether to advance H.R. 3633.
The September 15 CLARITY Act vote is a cloture vote on the motion to proceed. It is not a final passage vote. The measure needs 60 votes to clear this stage.
Republicans hold 53 Senate seats. They need at least seven Democrats or independents if every Republican backs the motion.
Why Are Democrats Still Opposing the CLARITY Act?
The Republicans released a new version of the CLARITY Act on Sunday. Lummis, Scott, and Boozman stated that it features 126 substantive amendments made according to requests from Democrats during negotiations.
Also Read: Tokenized Gold: FCA Weighs Key Exemption That Could Reshape UK Rules
The amended Senate bill on cryptocurrencies proposes stricter ethical standards for elected officials and their families. The President of the United States, Donald Trump, agreed with some aspects of the bipartisan ethical framework, such as the involvement of state attorneys general. (AP News)
However, a number of Democrats have found fault with this language. Warner said Democrats presented an alternative proposal, and Gallego continues to insist on additional ethical standards. Gallego cooperated with Republican Senator Thom Tillis in developing the ethical framework.
This debate is partially about the issue of enforcement. According to the critics, the DOJ plays an important role in this respect, and the state attorney general’s provision is insufficient to make an independent decision.
Senator Elizabeth Warren and Democratic staff on the Senate Banking Committee also criticized the latest framework. Their analysis argued that the enforcement structure leaves gaps in rules covering public officials and crypto conflicts of interest.
State Attorneys General Raise Separate Concerns
This pressure is not restricted to Senate Democrats either. On September 14, the Attorney General for the State of New York, Letitia James, led a bipartisan team of 17 more attorneys general in their opposition to this bill.
These attorneys general believe that this bill would undermine the states’ authority when it comes to regulating crypto-related fraud and investor protection. They also object to provisions allowing the SEC to preempt certain registration rules of states.
Stablecoin Rewards Remain Another Major Dispute
Regulations governing stablecoin yields are another point of contention between the legislators and the banking lobby. The new bill features a regulatory circuit breaker intended to combat the loss of deposits from community banks.
The provision requires the Treasury Secretary to determine whether the returns on stablecoins significantly undermine community banks’ deposits. Once the condition is proven, regulators are required to take action and plug the hole.
The trade associations believe that the system comes into play too late. The American Bankers Association and others maintain that the system fails to prevent deposit loss ahead of time.
This issue further complicates the voting process. While the banks demand stricter regulations on stablecoin yields, the bill provides for regulatory action if specific deposit flights have occurred.
What Happens After the CLARITY Act Senate Vote?
Cloture for the motion to proceed to H.R. 3633 is scheduled to mature at 2:15 p.m. ET on September 15. Reaching the 60-vote threshold moves the process forward toward the consideration stage of the Crypto Market Structure Act.
This does not mean sending the bill to the White House yet. It will give senators time to deliberate about the bill, amend it, and take a vote for its final approval.
The proposal from Democrats introduces another element into the negotiating process. The pressing matter is whether Republicans and some Democrats agree on the terms before the procedural vote.
Also Read: Could Crypto Tax Bills Rewrite the Rules for Miners and Traders?
Be the first to comment