The US Senate Banking Committee's draft legislation concerning the structure of the cryptocurrency market has presented unexpected challenges for key figures within the industry.
Rebecca Rettig, who was involved in parts of the negotiations and also sits on the Commodity Futures Commission’s (CFTC) Subcommittee on Digital Assets, stated that certain clauses within the draft text have raised significant questions for both the industry and regulatory bodies.
Following recent developments, the Senate Banking Committee has decided to postpone its consideration of the cryptocurrency market structure bill. Reports indicate that Coinbase's objections, after they withdrew their support for the final version of the bill, were a substantial factor in this decision.
Key Points of Contention in the Draft Legislation
According to Rettig, a primary point of contention revolves around the permissibility of paying returns on stablecoins. While offering interest on stablecoin balances would represent a substantial revenue source for cryptocurrency companies such as Coinbase, traditional banks have expressed concerns that this practice could disrupt their existing deposit structures. Coinbase CEO Brian Armstrong is reportedly expressing wariness regarding the draft due to this issue.
Another contentious aspect of the draft pertains to the tokenization of real-world assets. New regulations proposed for the representation of securities on the blockchain, which could potentially limit the authority of the SEC, have created unease among industry participants. Furthermore, there remains a lack of clarity on how decentralized finance (DeFi) applications, which operate autonomously on-chain without intermediaries, will be subject to regulation.
The draft law, which spans over 200 pages, has undergone numerous revisions since its initial publication in September. It has been noted that additional provisions that emerged in the 48 hours preceding this report were not adequately assessed by the sector. Specifically, concerns have been voiced that regulations concerning surveillance, DeFi privacy, and the jurisdiction of the Treasury Department could steer the draft in a direction that is less favorable to the sector.
Future Outlook and Industry Reaction
Rettig commented that this proposed regulation stands as one of the most comprehensive financial regulatory initiatives since the Dodd-Frank Act. She acknowledged that reconciling the interests of both the crypto sector and traditional banks within a single legislative text is a difficult but achievable task. It is indicated that the bill's progression in the Senate might resume in the final week of January, following further deliberation. However, a degree of uncertainty persists among both industry stakeholders and lawmakers regarding the ultimate form of the draft legislation.