Senate Banking Chair reports major progress on landmark crypto legislation

Senate Banking Committee Chair Tim Scott has confirmed that “real progress” is being made toward passing a massive cryptocurrency bill into law, following a meeting with bank executives on Thursday.

The U.S. Senate is advancing comprehensive legislation to govern cryptocurrency law, as well as other pieces of legislation, to clarify regulatory oversight and address gaps in current regulations, including the GENIUS Act.

Rapid developments in the field of digital assets, particularly stablecoins and decentralized finance (DeFi) tokens, have put investors at risk, and lawmakers are determining which cryptocurrencies fall under the jurisdiction of the SEC versus the CFTC.

The Senate is making progress on a major crypto bill

On Thursday, the South Carolina Republican met with Bank of America CEO Brian Moynihan, Citi CEO Jane Fraser, and Wells Fargo CEO Charlie Scharf. 

The team discussed the landmark legislation, which aims to establish comprehensive rules for the digital asset industry and assign regulatory authority to bodies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission.

“We are making real progress toward passing digital asset market structure legislation that will help cement America’s role as the crypto capital of the world,” Scott said in a statement on Thursday. “For months, my colleagues and I on the Senate Banking Committee have received valuable feedback from across the banking and crypto industries.”

The three banking CEOs were scheduled to meet with senators this week to discuss proposed legislation regarding cryptocurrencies. 

According to a source familiar with the meetings, two separate meetings, one with Democrats and another with Republicans, were called “cordial.” The discussions covered topics including yield, decentralised finance, and anti-money laundering concerns, among others, according to the person familiar. 

Banks raise concerns about gaps in the GENIUS Act

Yield-generating crypto assets, particularly stablecoins, have been a significant obstacle to passing a comprehensive crypto market structure bill. 

Banking associations argue that the stablecoin bill passed last summer, known as the GENIUS Act, has gaps that need to be addressed. They argue that the law’s limits on stablecoin issuers paying interest to holders are too weak, which could make these assets more attractive as stores of value and credit instruments than as payment tools, potentially creating “distorting market incentives” for banks, they said. The groups also contend that the GENIUS Act’s restrictions can be easily circumvented by exchanges, brokers, and other affiliated entities.

Lawmakers are rushing to pass a bill regulating the crypto industry into law. Over the summer, the House passed its version of a market structure bill, known as the Digital Asset Market Clarity Act, or Clarity for short, with bipartisan support.

The Senate has since begun efforts to pass a comparable bill. Senate Banking Committee Chair Tim Scott’s panel has drafted legislation that aims to divide regulatory authority between the SEC and the CFTC, introducing a new category called “ancillary assets” to clarify which cryptocurrencies are not considered securities. Meanwhile, the Senate Agriculture Committee released its own bill last month, which would expand the CFTC’s authority. Both committee drafts would need to be reconciled before moving forward.

In the past few days, Democratic and Republican senators have met to negotiate certain provisions of the bill, but the talks appear shaky. Some lawmakers are seeking to advance the bill and move it through the Senate Banking Committee before the end of the year, but it remains unclear whether this will happen.  

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