Bipartisan talks on the Senate's crypto market structure bill broke down Wednesday night, just hours before the Banking Committee markup. Journalist Eleanor Terrett reported that despite progress on “99% of the bill” — as Senator Cynthia Lummis put it — disagreements over ethics rules tied to the First Family and last-minute changes to the Blockchain Regulatory Certainty Act (BRCA) killed the deal.
First Family Ethics Rules Trigger Gridlock
The small bipartisan group had been trying to lock down Democratic support ahead of Thursday's committee vote. Senators Adam Schiff and Ruben Gallego pushed for tougher ethics and conflict-of-interest provisions linked to the First Family. Republicans balked, calling the language too aggressive. As disputes escalated, focus shifted to BRCA language.
BRCA: Non-Custodial Developer Shield Stalls Deal
The BRCA provision would protect non-custodial software developers from prosecution under money transmitter laws. Lummis warned that without federal crypto legislation, lawmakers would face blame if another FTX-style collapse occurs. She urged the committee to move forward despite the impasse. Thursday's vote is now expected to split largely along party lines, with over 100 amendments on the table.
Wall Street Banks and Elizabeth Warren Unite on Stablecoin Rewards
The bill has forged an unusual alliance between major Wall Street banks and Senator Elizabeth Warren. According to POLITICO, banking groups intensified lobbying efforts against stablecoin reward programs tied to crypto exchanges, arguing the bill still leaves loopholes for yield-like products resembling interest-bearing accounts. Senators Thom Tillis and Angela Alsobrooks had already negotiated a compromise restricting rewards tied to idle wallet balances, but banks want tighter caps. Warren backed tougher language this week, warning that unregulated crypto rewards threaten traditional banking stability. Senators Jack Reed and Tina Smith also proposed amendments strengthening stablecoin yield restrictions.
DeFi Groups Sound Alarm on Expanding AML Obligations
The DeFi Education Fund warned senators that several proposed amendments would hit decentralized finance infrastructure and developers hard. The group highlighted proposals from Senators Catherine Cortez Masto, Andy Kim, Chris Van Hollen, Elizabeth Warren, and Jack Reed. According to DEF, these amendments would expand anti-money laundering obligations and increase criminal liability risks for DeFi developers and software providers. Other proposals would broaden the definition of financial institutions under Bank Secrecy Act rules to include digital asset businesses and developers.
Thursday's markup now faces more than 100 filed amendments, with no clear path to bipartisan consensus.