US Crypto Regulation Stalls Over Conflict of Interest Concerns
The institutionalization of the United States digital asset market faced a major roadblock as the Clarity Act was blocked in the Senate amid intense conflicts of interest surrounding President Donald Trump’s family crypto business. Following the legislative defeat, Bitcoin, Ethereum, and related crypto-linked stocks experienced sharp declines.
On September 15, the US Senate held a cloture vote to begin deliberations on the crypto market structure bill, known as the Clarity Act, but it failed to pass with a 49-to-50 vote. Advancing the bill to the floor required a 60-vote supermajority, which fell short as it failed to secure enough Democratic support alongside defections from the Republican party.
The Stakes for the $2.3 Trillion US Crypto Market
The Clarity Act is designed to rewrite the rulebook for the approximately $2.3 trillion US cryptocurrency market. Its core objective is to clearly demarcate the Commodity Futures Trading Commission’s (CFTC) jurisdiction over digital commodities like Bitcoin and Ethereum from the Securities and Exchange Commission’s (SEC) oversight of investment contracts, while establishing registration and consumer protection standards for crypto exchanges.
The crypto industry has pushed heavily for the legislation to reduce regulatory uncertainty. According to Reuters, the sector poured at least $190 million into political activities this year. However, the biggest hurdle to the legislation proved to be the Trump family’s cryptocurrency ventures. Reuters estimates that since returning to the White House, the Trump family has generated at least $2.3 billion from major crypto operations such as World Liberty Financial (WLF) and the $TRUMP meme coin.
Market Fallout and Immediate Price Impact
Reflecting the dashed legislative hopes, Bitcoin dropped as much as 5.3% to $74,910 during trading, marking its largest intraday drop since June. Ethereum also tumbled by over 8%. On Wall Street, crypto exchange Coinbase fell 10.1% and Bitcoin treasury firm Strategy dropped 5.4%. In South Korea, related stocks like Woori Technology Investment (-7.6%), Danal (-10.2%), and KakaoPay (-11.4%) simultaneously weakened during the session on September 16 amid a confluence of rising global oil prices and US 10-year Treasury yields surpassing 5%.
Although Republican Senator Thom Tillis changed his vote from yes to no to preserve the procedural right for reconsideration, Reuters reported that the bill is effectively on ice for now as lawmakers prepare to leave Washington ahead of the November midterm elections.
