With a 15 to 9 vote, the Digital Assets Market Clarity Act or Clarity Act cleared the markup session vote at the Senate Banking Committee and is now headed to the full Senate.
While the primary fight between the banking industry and crypto sector was around what type of rewards can crypto exchange platforms offer to clients who hold stablecoins, inside the Senate hearing, the points of contention between Republicans and Democrats also included whether the Clarity Bill gives enough teeth to regulators and prosecutors, and enough protection to individuals and investors.
Senate Banking Committee Chairman, Repúblican Sen. Tim Scott urged his Democratic colleagues to vote the bill out of committee under the argument that there will be further opportunities to amend the bill before it gets a final vote on the Senate floor.
“For years the digital frontier was trapped in a regulatory gray zone. Developers, entrepreneurs and investors were left with uncertainty. They faced confusion and enforcement action when instead the government should have been crafting clear rules of the road,” Sen. Scott said during his opening remarks.
“It brings digital assets into the shadows and into a system that is safer, fairer and more transparent,” Sen. Scott added.
Ranking member, Sen. Elizabeth Warren criticized that the Banking committee was not addressing more important matters and instead, “are discussing a bill written by the crypto industry, for the crypto industry.” While arguing that the Banking committee should be considering other issues not related to crypto, Sen. Warren also criticized that Chairman Scott had dismissed over a dozen of amendments that were presented by Democrats in the past two days.
One of the main sticking points is Section 604, Blockchain Regulatory Certainty Act (BRCA), which states that software developers who don’t have control of the funds that pass through their platform, should not be treated as money transfers for the purpose of financial regulation. This would mean that they would not be held automatically liable for the source money that enters their platforms. The Democratic amendments significantly roll back those protections.
The crypto sector was not keen on many of the last minute amendments presented by democrats, especially around the BRCA. Peter Van Valkenburgh, executive director of the pro-crypto advocacy group Coin Center, announced via X, formerly Twitter, that Coin Center would withdraw support for the Clarity Bill if the Democratic amendments to the BRCA passed.
Although the bill found two Democratic votes— Senators Raul Gallego and Angela Alsobrooks— for several minority senators, the bill still lacks too many protections against money laundering.
“This bill that we’re looking at fails to address foundational gaps on money laundering responsibilities for conventional crypto businesses and under DeFi services,” argued Sen. Warren.
Warren and Senator Catherine Cortez Matso zeroed their attention on mixers and tumblers, arguing that the bill needs to allow regulators additional oversight. Mixers and tumblers are platforms that crypto holders use to obscure the trail of a crypto transaction to make it harder to follow to find the provenance of the fund.
The ranking member argued that the sole purpose of mixers and tumblers, such as Tornado Cash, is to launder illicitly gotten gains. Because of the open source nature of the blockchain, members of the crypto community argue that platforms like Tornado Cash are a way for crypto users to protect their personal details that could be used to identify their location or other private information.
With this vote, the bill is expected to be headed to the Senate floor but it is possible that further amendments are added to the bill to ensure a bipartisan vote. Sen. Gallego said that if some of his concerns were addressed by the time the bill reached the final vote, he would vote against the bill despite voting yes today.
Because the House passed a different version of the bill, both chambers of Congress would need to agree on a final language before it heads to the President’s desk, which Scott as indicated would happen by next month.
