Efforts to pass US legislation to regulate the cryptocurrency market collapse after partisan disagreements

Efforts to pass historic US legislation to regulate the cryptocurrency market collapsed on Tuesday, after Republicans and Democrats in the Senate failed to overcome months-long disagreements over ethical rules, the banking sector, and mechanisms for regulating the rapidly growing digital assets industry.

The Digital Asset Market Clarity Act failed to obtain the 60 votes needed to move to the discussion stage in the Senate, in a major blow to efforts to establish the first comprehensive federal framework for digital asset markets in the United States.

Controls related to US President Donald Trump's broad interests in the cryptocurrency sector were among the most prominent obstacles to reaching an agreement.

Democratic Senator Elizabeth Warren, the ranking member of the Senate Banking Committee, said that the bill entails “enormous risks” to families, national security and the American economy.

Warren added that the project, in light of the affordability crisis facing Americans, would enhance Trump's ability to make "billions and billions of dollars" from cryptocurrency activities.

Trump and members of his family had made more than a billion dollars from cryptocurrency-related projects over the past year, according to financial disclosures, which put the president's business interests at the heart of Democrats' objections to the bill.

In an attempt to save the legislation, Republicans introduced last-minute amendments to strengthen fairness provisions, including restrictions on elected officials issuing cryptocurrencies, requirements regarding certain holdings of digital assets, and granting greater enforcement powers to state attorneys general.

Republican Senator from Wyoming, Cynthia Lummis, one of the most prominent architects of the legislation, said that the final version included more than 120 amendments requested by Democratic figures. But she warned before the vote that rejecting the project would mean abandoning reforms related to politicians' personal interests, and leaving American leadership in the field of digital assets to foreign competitors.

Democrats believed that the amendments still contain loopholes, and grant a large amount of rule enforcement powers to officials appointed by Trump.

The dispute was not limited to partisan division, as community banks strongly opposed provisions allowing bonuses on stablecoin holdings, warning that this could withdraw deposits from traditional banks and reduce the financing available to farmers and small businesses. A number of Republican senators also expressed concerns about these provisions, making it more difficult to muster the votes needed to pass the bill.

The draft law exceeds 600 pages, and would have redistributed supervision of the digital assets market mainly between the US Securities and Exchange Commission and the Commodity Futures Trading Commission, instead of the complex regulatory system that changed with the succession of US administrations.

The House of Representatives passed a version of the legislation last year, while the Senate Banking Committee approved the project with bipartisan votes in May. But months of negotiations did not lead to a settlement capable of passing a vote in the House, despite intense pressure from the cryptocurrency industry and a recent attempt by Republicans to rewrite the legislation.

The project's failure came despite years of negotiations, an intense pressure campaign, and political spending amounting to hundreds of millions of dollars. Its supporters believe that the passage of permanent legislation is necessary to give companies and consumers clear rules, rather than leaving regulation of the sector largely to the decisions of federal agencies.

The project received strong support from the White House, which presented cryptocurrencies as part of a global technological race that the United States risks losing to international competitors.

With the November 3 midterm elections approaching and little time remaining on the congressional agenda, a failed vote could delay sector regulation efforts until a new Congress convenes.

The faltering legislation comes at a time when Congress faces a more complex regulatory challenge related to artificial intelligence, with mounting warnings about the dangers of advanced systems and lawmakers divided over whether there is an urgent need to regulate them or whether new rules may hinder American innovation and give China a competitive advantage.

In the markets, Bitcoin, the largest cryptocurrency by market value, fell by about 5 percent to $75,039 by 18:50 GMT, at a time when the cryptocurrency sector received a new political blow with the bill faltering in the Senate.