U.S. senators lament failure to win bipartisan support, yet, on crypto Clarity Act

In the hearing to advance the market structure bill to its next stage, lawmakers from both parties granted lengthy talks hadn't yet found needed common ground.

What to know:

• The U.S. Senate Banking Committee hearing to advance the crypto Clarity Act got off to a partisan start, with the two major parties not yet landing on common ground to get behind the market structure effort.
• Republican Senator Cynthia Lummis, one of the key negotiators, suggested that the parties have only about 1% of the bill remaining to work out in order to get to bipartisan support.

As U.S. senators launched the long-awaited hearing called to advance the crypto market structure legislation, they granted that there was still a rift between Republicans and Democrats on the latest version of the Digital Asset Market Clarity Act.

The Thursday hearing of the Senate Banking Committee, known as a "markup" hearing to weigh dozens of amendments to revise and overhaul the bill's language, represents a key moment in the process to move this policy effort past a longtime roadblock. Republican senators may be the only supporters at this moment, but the eventual aim is to finish with a bipartisan version that can pass the overall Senate with sufficient Democratic support.

Members of the committee began their session with a nod to difficult, bipartisan talks that have seemingly still led to an impasse Thursday on the latest version of the legislation.

"We will disagree on this today, but I hope that what we end up with is a legislative product that is good now and gets another bite at the apple as it heads to the floor," said Chairman Tim Scott. "This is not over, and I hope that no one thinks that this is over. This process has been transparent. It has been hard and it has been clear, and that's good news for the American people who are watching this process."

Down to the wire, lawmakers and their staffs sought to hash out remaining issues, including the bill's treatment of decentralized finance (DeFi) and a major government-ethics provision to keep senior officials out of the crypto industry. If the bill passes along party lines at the end of the hearing, 13-11, it still moves forward to the next steps, including merger with a similar bill that already passed the Senate Agriculture Committee.

"This is by far the hardest piece of legislation I have ever worked on," said Senator Cynthia Lummis, a Wyoming Republican who leads the panel's digital assets subcommittee. She noted that it's a "case of first impression" and seeks to address new innovations. Lummis said the lawmakers negotiating the bill will keep working on the "1% of remaining issues that didn't come to fruition before today, despite our around-the-clock negotiations."

A fundamental disconnect was apparent at the hearing, because the most senior Democrats — including ranking member Elizabeth Warren — were the legislation's most vocal critics, while the many Democrats who actively participated in negotiations with Republicans weren't engaged in the opening remarks.

"This bill is just not ready for prime time," Warren said. "First, the draft in front of us would blow a hole in our securities laws that have protected investors since 1929. Most Americans don't want their pensions at risk so that a few crypto billionaires can juice their own profits. Second, this bill declares open season on defrauding American consumers who use crypto."

Democrats objected to many amendments that were scrapped on procedural grounds before the hearing began, though Scott contended that the procedural dispute began with Democrats targeting a Republican amendment.

The hearing began knocking down most of the Democratic amendments one-by-one along partisan lines, with lawmakers briefly making their cases for each. The partisanship was reminiscent of the similar markup earlier this year in the agriculture panel, though some provisions received successful votes on Thursday, such as an amendment regarding the extension of government protections involving the practice of calculating margin across portfolios.

While Democrats continued to express resistance to Clarity Act language and argue it hadn't answered significant questions on illicit finance and consumer protection, Republicans argued that much of the bill addresses those concerns — which currently have no federal protections — for the first time.

Senator Thom Tillis, the Republican who helped lead talks over a longtime sticking point involving yield on stablecoins, countered that, "The status quo, quite honestly, is unacceptable."

Read More: Clarity Act, in the flesh, unveiled by U.S. Senate Banking Committee before hearing

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The Senate Banking Committee will debate amendments before ultimately voting on the market structure legislation on Thursday.

What to know:

• The Senate Banking Committee is debating its long-awaited market structure bill, with the ultimate goal of voting on whether to advance the bill to the full Senate at the end of the hearing.
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