- Key insight: Ethics concerns from Senate Democrats remain the biggest obstacle for the upper chamber to pass a crypto market structure bill.
- What's at stake: No further negotiations on yield-related restrictions on stablecoins are currently planned among lawmakers, despite bank lobbying efforts to make headway on the issue.
- Forward look: Lawmakers face a narrow window before August recess to reach a deal, after which the urgency of spending legislation and the heart of the midterm campaign will make passage exceedingly unlikely.
WASHINGTON — The next few weeks before the August recess offer Congress its last realistic chance to pass a piece of crypto legislation it has spent months fighting over.
But the bill is still a long way away from getting passed, most recently because of concerns about public officials' use of and ability to profit from crypto holdings from Senate Democrats. Republicans will need a number of Democrats to get to the 60 votes required to bring the bill to the floor, and those Democrats who signed onto the bill when it passed on committee — Sens. Ruben Gallego, D-Ariz., and Angela Alsobrooks, D-Md. — have said that they won't continue to back it if it doesn't include robust conflict-of-interest laws.
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Negotiations on ethics, which came to the fore a couple of weeks ago, have since gone silent, three people familiar with conversations between key Republican and Democratic lawmakers said. The sticking point for Democrats getting on board remains getting some kind of enforcement mechanism on the conflict-of-interest rules that would prevent senior government officials — including the president — from profiting off of crypto investments.
A potential compromise that would have let state attorneys general sue the Department of Justice if they failed to enforce the ethics rules dropped out of negotiations, and they haven't picked back up since, according to two of the people.
Lawmakers at this point are running out of time to square the circle, observers say,
"If they don't have significant progress, like in the next week or two, it's going to be difficult to get something done in August, which is probably when this needs to get done," said Justin Schardin, vice president of financial services at CFRA Washington Analysis.
Once lawmakers leave for August recess, senators who are up for reelection and the entire House membership will be in peak campaign season, making the calendar exceedingly tight.
That said, there still might be a vote on a bill, even if Republicans don't necessarily think it'll make it all the way to law.
"What we see is the [crypto] industry putting a tremendous amount of pressure on politicians in election year to come up with either a bill that locks in the kinds of regulatory changes they would like to see, or failing that, of a vote that sort of they might call it an accountability vote that makes it clear who who is loyal to crypto and who is not," said Mark Hays, an associate director at Americans for Financial Reform. "It's going to be up to the Democrats to decide whether they truly name the red line, or whether they're going to accept something that nominally addresses the ethics issue, but really falls far short of what's needed."
Election year politics could also give Democrats more of an incentive to hold their line on an ethics provision. President Donald Trump's latest ethics disclosures show that he made
"Ethics is the most likely thing that would kill this bill," Schardin said. "I don't think Trump will sign something that materially harms him financially — so if it doesn't, then you know Democrats are going to have to try to sell that to their base."
Ed Groshans, senior vice president for financial services at Compass Point, said he is more optimistic about the chances of Democrats and Republicans finding some kind of agreement on the issue, although it might not go as far as Democrats wanted on enforcement.
"As long as we get something with ethics, I think the dominoes line up," he said. "There has to be some give by the White House, which apparently they're willing to do, and once that gets away and wrapped up, I think we'll be north of 65 votes — should it get taken up for a vote."
