Senate cloture vote on Clarity Act fails, dealing regulatory blow to crypto industry

Senate cloture vote on Clarity Act fails, dealing regulatory blow to crypto industry. The Senate on Tuesday voted to block the Clarity Act from advancing, dealing a blow to the crypto industry's push for a comprehensive market framework.

What happened

Cynthia Lummis, R-Wyo. , the top champion of the crypto industry in the Senate, told reporters earlier Tuesday that "it's over" if the Clarity Act procedural vote failed. For the crypto industry, the significance of Tuesday's vote was on whether the act could move forward for Senate debate and consideration. The vote was a stunning loss for the crypto industry, which had exuded confidence that enough senators would vote to advance the bill. The failed vote likely means the crypto industry will have to wait until next year for clearer rules.

Tuesday's vote might pave the way for Fairshake, a crypto political action committee, to donate to candidates running against senators who voted to block the Clarity Act. Leading up to the vote, Democrats expressed frustration that Republican negotiators didn't meet their demands regarding ethics to address profits gained from crypto ventures by President Donald Trump and his family. Even if successful, it would still need to then survive further Senate negotiations and votes, then clear the House before reaching President Trump's desk.

The wider picture

Though executives and investors say legislation would lend certainty and help attract long-term capital, much of the industry has resigned itself to the likelihood that regulatory momentum may have to be built outside of Congress. The procedural vote leaves the bill stalled on Capitol Hill after months of negotiations aimed at building bipartisan support. Republican leaders had released a revised version of the bill Sunday, adding new ethics restrictions to address Democratic concerns about public officials profiting from crypto ventures.

"The compromise we had was a good ethics compromise that would have bought a lot of Dem votes," said Sen. Ruben Gallego, D-Ariz. , a key Democratic negotiator, before the vote. The vote on the motion to proceed attracted 50 votes for and 49 against, far below the 60 votes needed to clear the procedural hurdle. Crypto frameworkThe bill would establish a framework for crypto, divide oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission, set registration requirements and strengthen protections against money laundering.

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What has been reported

CM=CRCLFollow your favorite stocksCREATE FREE ACCOUNTThe Capitol in Washington, Jan. Those changes weren't enough, however, to resolve the remaining opposition. Gallego charges Republicans with caring "more about making sure the president keeps making money than actually bringing regulations" and consequently "failing the whole system. "The price of bitcoin was last down 3%, while Coinbase and Circle shares slid 8% and 10%, respectively, amid the broader market sell-off. The SEC, for example, has proposed allowing startups to sell as much as $75 million of tokens without registering, while the CFTC recently approved the first bitcoin perpetual futures in the U.

Also complicating bringing the bill back up for consideration is the midterm election in seven weeks. Senators are scheduled to leave Washington in early October and not return until after the election. The House recesses even earlier, heading out of town at the end of this week.

What happens next

Members, especially those in tight races, are eager to return to their home states and hit the campaign trail. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.