World

Senate Blocks Major Crypto Regulation Bill Amid Ethics Dispute Over Trump's Digital Asset Holdings

By AFP

WASHINGTON — A major effort to pass comprehensive US cryptocurrency legislation failed on Tuesday after Senate Republicans and Democrats could not resolve disputes over ethics rules, banking safeguards, and regulatory oversight of the rapidly expanding digital asset industry.

The Digital Asset Market Clarity Act fell short of the 60 votes required to advance for Senate debate. Chief among the sticking points were concerns about how the bill would handle President Donald Trump's substantial financial interests in cryptocurrency.

Senator Elizabeth Warren of Massachusetts, the senior Democrat on the Senate Banking Committee, said the legislation carried "massive risks to families, our national security, and our economy." She added that the bill would allow Trump to "rake in billions and billions of dollars from crypto" at a time when many Americans are struggling with rising costs.

The bill's failure represents a significant setback for efforts to create the first comprehensive federal regulatory structure for digital assets. It also underscores broader challenges facing Congress as it attempts to regulate fast-evolving technologies, a difficulty mirrored in ongoing debates over artificial intelligence oversight.

The more than 600-page bill would have split regulatory authority primarily between the Securities and Exchange Commission and the Commodity Futures Trading Commission, replacing a fragmented system that has changed under different administrations. The House passed its own version last year, and the Senate Banking Committee approved the measure with bipartisan support in May. However, months of subsequent negotiations failed to produce a version capable of clearing the full Senate, despite intense lobbying from the crypto sector and a last-minute push by Republicans to revise the bill's language.

With midterm elections scheduled for November 3 and limited legislative time remaining, Tuesday's vote may effectively delay any further action until a new Congress convenes.

Ethics concerns took center stage in the debate. According to financial disclosures, Trump and his family earned more than $1 billion from cryptocurrency ventures last year, fueling Democratic objections centered on potential conflicts of interest.

In response, Republicans introduced last-minute amendments meant to strengthen ethics safeguards, including limits on elected officials issuing their own cryptocurrencies, disclosure requirements for certain crypto holdings, and expanded enforcement authority for state attorneys general.

Senator Cynthia Lummis of Wyoming, a key Republican author of the bill, said the final version incorporated more than 120 changes requested by Democrats. She argued that voting against the bill meant rejecting genuine ethics reforms, ceding US leadership in digital assets to foreign rivals, and leaving American consumers without protections in crypto markets.

Democrats, however, said the ethics provisions still contained loopholes and placed too much enforcement power in the hands of officials appointed by Trump.

Separately, community banks strongly opposed provisions that would have allowed rewards on stablecoin holdings, warning that such incentives could draw deposits away from traditional banks and reduce available credit for farmers and small businesses. Several Republican senators also raised concerns about these provisions, complicating leadership's efforts to secure enough votes.

The outcome marks a setback for the crypto industry despite years of negotiation, extensive lobbying, and hundreds of millions of dollars spent on political influence. Supporters of the bill argued that clear, permanent legislation was necessary to provide certainty for businesses and consumers, rather than leaving regulation to shifting agency interpretations. The White House had strongly supported the measure, describing cryptocurrency regulation as part of a broader technological competition with other nations, particularly China.

The bill's collapse comes as lawmakers also grapple with regulating artificial intelligence, an area where experts have issued increasingly urgent warnings about potential risks. Despite calls from both parties for stronger AI safeguards, Congress remains split over whether new rules are urgently needed or would instead hinder American innovation and benefit international competitors.

Unlike AI, the cryptocurrency sector has faced years of congressional scrutiny and boasts a well-established, well-funded lobbying presence. Even so, the failure to pass landmark legislation illustrates the difficulty lawmakers face in keeping pace with technologies that continue to evolve rapidly.

Following the vote, Bitcoin, the largest cryptocurrency by market value, fell sharply, dropping about five percent to $75,039 on Tuesday.