The Digital Asset Market Clarity Act failed to obtain the 60 votes required to advance to debate in the US Senate, dealing a major setback to efforts to establish a comprehensive federal regulatory framework for cryptocurrency and other digital assets.
Concerns over safeguards related to President Donald Trump’s extensive cryptocurrency interests emerged as one of the major obstacles to reaching a bipartisan agreement.
Massachusetts Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, criticised the legislation, saying it posed significant risks to families, national security and the US economy.
Warren also argued that the bill could increase Trump’s ability to generate substantial income from cryptocurrency ventures while Americans face rising affordability pressures.
The Senate vote marked a significant setback for efforts to establish the first comprehensive federal framework governing digital-asset markets. It also highlighted Congress’s difficulties in developing legislation for rapidly evolving technologies.
The more than 600-page bill would have divided regulatory oversight primarily between the Securities and Exchange Commission and the Commodity Futures Trading Commission. It was intended to replace the fragmented regulatory system that has changed across successive administrations.
A version of the legislation was approved by the House of Representatives last year, while a Senate committee advanced the measure on a bipartisan vote in May.
However, months of negotiations failed to produce a compromise capable of securing sufficient support on the Senate floor. The crypto industry had strongly lobbied for the legislation, while Republicans made a final effort to revise the bill before the vote.
With the November 3 midterm elections approaching and limited time remaining on the congressional calendar, the Senate setback could push the legislation into the next Congress.
Financial disclosures show that Trump and his family earned more than $1 billion from cryptocurrency ventures last year, placing the president’s business interests at the centre of Democratic concerns over the bill.
Republicans introduced late changes aimed at strengthening ethics provisions. These included restrictions on elected officials issuing cryptocurrencies, disclosure requirements for certain crypto holdings and expanded enforcement powers for state attorneys general.
Wyoming Senator Cynthia Lummis, one of the bill’s leading Republican architects, said the revised legislation included more than 120 changes requested by Democrats.
Lummis argued that rejecting the bill would mean opposing proposed ethics reforms, potentially weakening US leadership in digital assets and leaving consumers without a comprehensive regulatory framework.
Democrats, however, maintained that the proposed safeguards contained loopholes and gave excessive enforcement authority to officials appointed by Trump.
Community banks strongly opposed provisions that would allow rewards on stablecoin holdings, warning that such measures could encourage customers to move deposits away from traditional banks.
They argued that a decline in deposits could reduce lending capacity for farmers and small businesses.
Several Republican senators also raised concerns about the stablecoin provisions, making it more difficult for party leaders to secure the votes required to advance the legislation.
The cryptocurrency industry’s failure to secure the legislation came after years of negotiations, extensive lobbying and significant political spending.
Supporters of the bill argued that permanent federal legislation was necessary to provide businesses and consumers with clear and consistent rules instead of leaving regulation largely dependent on federal agencies.
The White House backed the legislation and presented cryptocurrency as part of a global technology race, warning that the United States could lose ground to international competitors.
The setback comes as Congress also faces growing disagreements over regulation of artificial intelligence. AI executives and researchers have issued warnings about the potential risks associated with increasingly powerful systems, prompting lawmakers from both parties to consider additional safeguards.
However, lawmakers remain divided over whether tighter regulation is necessary or could slow US technological innovation and strengthen China’s competitive position.
The crypto sector has faced congressional scrutiny for years and has developed a well-funded lobbying effort advocating for clear regulatory rules.
The Senate’s failure to advance the cryptocurrency bill underscores the difficulties lawmakers face in regulating technologies that are developing rapidly.
Bitcoin, the world’s largest cryptocurrency by market value, also fell sharply on Tuesday, declining about 5 per cent to $75,039.
