Trump-backed crypto bill blocked by US Senate as Bitcoin falls 5%

The US Senate has blocked a major cryptocurrency bill backed by President Donald Trump, dealing a setback to the crypto industry’s push for clearer rules in the country, Aljazeera reported on Tuesday. 

The Digital Asset Market Clarity Act failed to get the 60 votes needed to move ahead for debate on Tuesday. The vote was 50-49 in favour.

Four Republican senators, Jerry Moran, Rand Paul, Josh Hawley and Thom Tillis, joined Democrats in voting against the bill.

The bill was aimed at creating the first comprehensive federal rules for digital-asset markets in the US. Its failure means the crypto industry will have to wait longer for a clear set of rules from Congress.

Why did the bill fail?

The bill faced opposition from both Democrats and some Republicans.

One of the main issues was Trump’s own crypto business interests. Trump has earned more than $1.4bn from his family’s crypto ventures. He had also urged Congress to pass the bill and called himself a “crypto president”.

Massachusetts Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, said the bill posed “massive risks to families, our national security, and our economy”.

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“And if that’s not bad enough, while Americans across the country suffer from an affordability crisis, this bill will turbocharge President Donald Trump’s ability to rake in billions and billions of dollars from crypto,” she said.

Community banks also strongly opposed parts of the bill. They were particularly concerned about provisions that would allow rewards on stablecoin holdings.

Banks said these rewards could encourage customers to move their money out of traditional bank accounts. This could leave banks with less money to lend to farmers and small businesses.

Some Republican senators also raised concerns about these provisions, making it difficult for party leaders to get enough support.

Bill could return later

The failed vote does not necessarily mean the bill is permanently dead.

Tillis changed his vote from yes to no as part of a procedural move. This keeps open the possibility of bringing the bill back for another vote later.

However, Congress is set to leave Washington this month ahead of the November midterm elections. That leaves limited time for lawmakers to reach a new agreement.

The defeat is also another example of how difficult it has been for US lawmakers to create rules for fast-growing technologies. Congress is facing a similar debate over artificial intelligence.

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What it means for crypto

The crypto industry had spent hundreds of millions of dollars campaigning for the bill.

Without a new law from Congress, the US Securities and Exchange Commission and the US Commodity Futures Trading Commission will have a bigger role in shaping crypto rules.

Industry executives and analysts have said that only Congress can create a long-term regulatory framework. Without legislation, rules could change with the political climate and may also face legal challenges.

The Trump administration’s rollback of dozens of SEC and consumer watchdog policies introduced under former Democratic President Joe Biden has also added to the uncertainty.

Crypto markets reacted as the Senate vote appeared likely to fail. Bitcoin fell more than 5 percent, its biggest daily percentage decline since June. Shares of crypto exchange Coinbase and stablecoin issuer Circle fell as much as 10 percent.