Clarity Act advances 15-9 despite Warren's 40 amendments

The US Senate Banking Committee advanced the Digital Asset Market Clarity Act in a 15-9 vote on May 14, pushing the comprehensive crypto framework to the full Senate floor despite fierce opposition and more than 40 failed amendments from Senator Elizabeth Warren.

"The bill keeps innovation in the U.S. by updating outdated rules while giving law enforcement better tools to go after bad actors," Senator Tim Scott, the committee's chairman, said in his opening remarks.

The bipartisan vote saw two Democrats, Ruben Gallego and Angela Alsobrooks, join Republicans in favor. Key amendments from Senator Warren targeting sanctions authority, crypto in retirement accounts, and alleged ties between crypto and illicit finance, including those of Jeffrey Epstein, were defeated in a series of 11-13 votes.

The bill now heads for reconciliation with a version from the Senate Agriculture Committee before a full Senate vote, where it needs 60 votes to pass. With a drop-dead deadline seen before the August recess, the contentious committee session highlights the significant challenge in securing enough Democratic support.

Warren Mounts Broad Attack on Crypto Risks

The markup session was dominated by sharp criticism from Senator Warren, who argued the bill was "just not ready" and introduced over 40 amendments to address what she described as dangerous loopholes. In one of the hearing's most charged moments, Warren introduced an amendment to force the release of confidential bank records related to the disgraced financier Jeffrey Epstein, who she noted was an early backer of crypto. The proposal failed 11-13 after Republican lawmakers questioned its relevance to the bill.

Another defeated amendment sought to restore sanctions authority over decentralized platforms like Tornado Cash, which Warren argued are "designed to make it easy to launder a huge pile of money." Lummis, a key Republican supporter of the bill, countered that the legislation already addresses sanctions. Warren's proposals to keep crypto out of retirement accounts and close a "tokenization loophole" also failed by narrow 11-13 margins.

Stablecoin Compromise and Industry Support

A central sticking point in negotiations, provisions around stablecoin yields, found a compromise ahead of the vote. The bill now bans rewards on passive stablecoin holdings that are functionally equivalent to interest but permits rewards for activities like trading and staking.

The bill's advancement was met with approval from major crypto industry players. Coinbase CEO Brian Armstrong called the bill a "true compromise," while Circle CEO Jeremy Allaire said it marked "meaningful, bipartisan progress." Ripple CEO Brad Garlinghouse also voiced strong support, stating, "If the largest economy in the world is going to lead on crypto - and it must - this is the moment."

Ethics and Other Amendments Shape Debate

The debate also touched on ethics and the broader scope of regulation. An amendment from Senator Chris Van Hollen to prohibit senior government officials from holding ties to the crypto industry failed after a heated exchange. Van Hollen specifically referenced former President Trump's family's involvement in "corrupt crypto ventures," a characterization strongly opposed by Republican Senator Bernie Moreno.

While many Democratic amendments failed, a proposal from Republican Senator Mike Rounds to create sandboxes for artificial intelligence tools passed with a bipartisan 15-9 vote, adding another dimension to the regulatory framework.

This article is for informational purposes only and does not constitute investment advice.