WASHINGTON — A sweeping cryptocurrency bill that had been one of the digital-asset industry’s biggest priorities in Washington collapsed in the Senate on Tuesday, after lawmakers failed to muster the 60 votes needed to advance the legislation.
The Senate voted 49-50 against moving forward with the Digital Asset Market Clarity Act, effectively putting the legislation on ice as Congress prepares to leave Washington ahead of November’s midterm elections. The defeat marked a major setback for an industry that has spent hundreds of millions of dollars on lobbying and political campaigns while pressing Congress to establish a comprehensive federal regulatory system for digital assets.
The Clarity Act was designed to establish clearer rules governing the roughly $2.3 trillion cryptocurrency market, including defining the respective roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission. Supporters said the legislation would end years of regulatory uncertainty and give crypto companies firmer legal ground on which to operate in the United States.
The measure had already passed the House last year, but negotiations repeatedly stalled in the Senate over a series of contentious issues, including regulation of stablecoin rewards, protections for software developers and ethics provisions governing public officials with financial interests in cryptocurrency.
Republicans had hoped that a revised version unveiled over the weekend would attract enough Democratic support to clear Tuesday’s procedural hurdle. The new draft included 126 substantive changes requested by Democrats, according to its Republican authors.
President Donald Trump had also agreed to new ethics restrictions as part of an effort to help move the legislation forward. The revised language would impose limits on crypto-related activities by elected federal officials, other government officials and their spouses and would give state attorneys general a role in enforcing conflict-of-interest provisions.
But the changes failed to win over enough Democrats, many of whom argued that the ethics provisions did not go far enough to address concerns surrounding Trump’s own cryptocurrency interests and those of his family.
Trump’s financial involvement in the industry became one of the central obstacles during months of negotiations. His family has interests in World Liberty Financial, and Trump has also been associated with a meme coin. Democrats argued that any major rewrite of federal cryptocurrency law needed stronger provisions preventing a sitting president from financially benefiting from digital assets while simultaneously overseeing the federal agencies responsible for regulating them.
Republicans countered that the revised bill incorporated substantial concessions on ethics and accused Democrats of allowing political disagreements involving Trump to derail legislation intended to establish rules for an increasingly important financial sector.
Sen. Cynthia Lummis (R-Wyo.), one of the leading architects of the legislation, had urged senators before the vote to seize what she described as a rare opportunity to enact comprehensive crypto regulations.
“The Clarity Act is right in front of us and this moment won’t come along again for years,” Lummis wrote ahead of the vote. “Let’s take the win and get this done.”
Senate Majority Leader John Thune (R-S.D.) also made the case for the legislation Tuesday, arguing that the federal government needed to provide clear rules for digital assets while ensuring that cryptocurrency innovation remained in the United States.
Thune said the legislation would distinguish between the regulatory responsibilities of the SEC and CFTC while requiring the agencies to coordinate their rules. He also argued that the measure would prevent digital-asset companies from evading securities laws applicable to other financial products.
Democrats remained unconvinced, particularly over the ethics language. Sen. Mark Warner (D-Va.) said Monday that while negotiators had made some progress, the changes were insufficient.
“There’s been some movement. I don’t think the ethics provision is near enough,” Warner said. “And again, it’s frustrating because we’ve had these same three issues outstanding for six, eight weeks, and why this couldn’t have been dealt with earlier? I’m really concerned.”
Sen. Elizabeth Warren (D-Mass.) and other Democrats also argued that the revised enforcement mechanism remained too weak. Democratic Senate Banking Committee staff contended that the language would still leave the Justice Department with significant control over whether ethics restrictions involving the president were enforced.
The dispute over stablecoins created another obstacle. Banks have warned that allowing crypto companies to offer rewards tied to stablecoin holdings could pull deposits out of traditional financial institutions, potentially reducing the money available for community lending. Crypto companies have argued that excessively restricting those rewards would protect banks from competition and hinder financial innovation.
The latest compromise would have authorized the Treasury secretary to temporarily restrict stablecoin rewards if payment stablecoins caused significant deposit outflows from community banks. The proposed “circuit breaker” could remain in place for up to 18 months after enactment.
The legislation also became entangled in a fight over legal protections for developers of decentralized crypto software. Industry advocates wanted stronger safeguards to prevent developers who do not control users’ funds from being prosecuted as money transmitters. Some of those protections were weakened in the final Senate draft, drawing criticism from portions of the crypto industry itself.
Tuesday’s defeat is especially significant because of the rapidly shrinking congressional calendar. Congress is preparing to leave Washington as lawmakers turn their attention to the Nov. 3 midterm elections, leaving little time to restart negotiations and assemble another bipartisan coalition. Reuters reported that the vote effectively leaves the legislation with little prospect of revival in the immediate future.
The result also represents a dramatic reversal for an industry that entered the current Congress expecting major legislative victories. Crypto companies and executives have poured enormous sums into political activity in recent election cycles, backing candidates they considered supportive of digital assets and seeking a more favorable regulatory environment in Washington.
The industry did score a significant victory last year with enactment of the GENIUS Act, which established federal rules governing stablecoins. Crypto advocates viewed the Clarity Act as the next and far more ambitious step: creating a broader framework governing the trading and regulation of digital assets throughout the United States.
Tuesday’s Senate vote does not prevent federal regulators from continuing to develop cryptocurrency rules on their own. The SEC and CFTC have both been pursuing regulatory changes affecting digital assets. But industry officials have argued that legislation passed by Congress would provide greater permanence and certainty than regulations that could be altered by future administrations.
The failed vote was also felt in financial markets. Bitcoin had already fallen below $77,000 ahead of the Senate action, while shares of major crypto-related companies including Coinbase, Strategy and Robinhood declined as investors anticipated the possibility that the bill would fail.
With Tuesday’s vote, the crypto industry’s long-running effort to secure a comprehensive federal market structure law now faces an uncertain future — and, with Congress rapidly running out of legislative days before the midterms, another attempt may have to wait until a new Congress convenes.
