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Negotiations over the CLARITY Act broke down late Tuesday night, hours before the Senate Banking Committee was due to mark up the crypto market structure bill.
A small bipartisan group of senators spent the evening trying to close the remaining gaps but ended without agreement, according to journalist Eleanor Terrett.
Senator Cynthia Lummis said the bill is 99% agreed upon and urged colleagues across the aisle to resolve the outstanding issues after the committee vote. She warned that failure to pass the legislation leaves the industry exposed to another FTX-style collapse with no regulatory framework in place.
“I hope my colleagues across the aisle will work with me to get the remaining 1% resolved after we pass this bill out of committee. Otherwise, when or if another FTX happens, we will have no one to blame but ourselves,” she said.
What’s Holding Up the Deal?
The latest version of the CLARITY Act spans more than 309 pages and is considered the most advanced crypto market structure bill the Senate has handled so far.
The legislation is designed to clearly separate which digital assets fall under SEC oversight and which are regulated by the CFTC. It also creates rules for crypto exchanges, brokers, stablecoins, self-custody protections, and blockchain developers.
However, two major issues reportedly caused negotiations to break down overnight.
The first involves ethics and conflict-of-interest provisions tied to the First Family and political figures involved in crypto-related businesses. Democrats, including Adam Schiff and Ruben Gallego, were pushing for stronger compromise language before supporting the bill.
According to Terrett, progress was reportedly made on the ethics side during negotiations.
The second and bigger issue involved concerns around the Blockchain Regulatory Certainty Act (BRCA). The BRCA provisions are meant to stop non-custodial software developers and blockchain infrastructure providers from being prosecuted under money transmitter laws.
Some Democrats raised last-minute concerns that parts of the language could weaken anti-money laundering enforcement protections.
Senate Vote Could Turn Partisan
At this stage, uncertainty still remains around how the five pro-crypto Democrats on the Banking Committee will vote during today’s markup session.
For now, expectations inside Washington are increasingly shifting toward a largely partisan committee vote instead of a bipartisan breakthrough.
Despite the overnight setback, industry leaders still see the legislation as the closest the U.S. has ever come to establishing comprehensive crypto regulation after years of legal uncertainty.