Challenges In Stablecoin Law Stalls Senate’s Progress On New Crypto Bill – Report

According to a recent report by Roll Call, US Senator Cynthia Lummis, an advocate for digital assets in Congress, is delaying the upcoming crypto market structure bill as the Senator is reluctant to revisit a provision from the recently passed GENIUS Act, which prohibits stablecoin issuers from offering interest payments.

Lawmakers Split Over Crypto Interest Provisions

Senator Lummis is said to be resisting pressures from both Republicans and Democrats to change the interest language in the stablecoin bill. The banking industry argues that this provision creates a loophole that allows crypto exchanges to offer rewards, effectively enabling them to pay interest.

Lummis shared her perspective with reporters, stating, “I’m of the opinion that we should leave the stablecoin bill alone. We’ve got enough problems with market structure.” In response, the crypto industry has launched a campaign to maintain the existing stablecoin rewards policy. 

Opponents of crypto interest are advocating for the rewards issue to be addressed in the new market structure legislation currently in development. This bill aims to establish rules for the operation and oversight of digital asset markets.

Senator Bill Hagerty, a Republican from Tennessee and sponsor of the stablecoin bill, acknowledged the complexity surrounding the question of crypto interest, stating, “This is something that’s going to require a lot more attention from my colleagues to address. Everything is up in the air.”

Crypto And Banking Lobbies Clash

Last month, Senate Banking Republicans updated a draft of the market structure bill, which Chairman Tim Scott hoped to advance by the end of September. 

However, this deadline was missed due to various obstacles, including the conflict between banking and crypto lobbies regarding stablecoin interest and the bill’s approach to decentralized finance (DeFi).

A group of crypto-friendly Senate Democrats recently proposed amendments to the bill that were rejected by Republicans and the crypto industry. These Democrats want the legislation to uphold the intent of prohibiting interest or yield paid by stablecoin issuers, whether directly or indirectly through affiliates.

Chairman Scott appears to be prioritizing the concerns of Democrats over those of Republicans regarding crypto exchange rewards. He has postponed a markup of the bill to allow Democrats more time to engage with the legislative text, as noted by his spokesperson Jeff Naft. 

Lawmakers are hesitant to predict when the committee might reach a consensus for a markup. “We’re trying to get a date for a markup,” Lummis remarked. When asked when that might be, she replied, “When we can agree on a date for a markup.”

Adding to the complexity of advancing the bill is the looming partial government shutdown. Democrats have indicated that they prefer to finalize the base text of the bill before proceeding to a markup.

Crypto advocates are pushing for swift action on market structure legislation this year. Mason Lynaugh, community director for Stand with Crypto, stated: 

The Senate must act quickly and deliberately to pass market structure legislation. Congress has the opportunity to position America as a global leader in the crypto industry, achievable only through effective market structure legislation. 

The group reported sending over 320,000 letters from more than 160,000 participants to Senate offices in recent weeks, urging lawmakers to reject a new anti-consumer initiative from the banking industry aimed at eliminating stablecoin rewards.

Featured image from DALL-E, chart from TradingView.com