Senate Ag committee advances ‘crypto’ market structure bill

The U.S. Senate made history Thursday by advancing a digital asset market structure bill, but they did so over the objections of the committee’s Democratic members, suggesting partisan discord could yet derail this process.

The Senate made history on January 29 when the Agriculture Committee held the first-ever digital asset markup session for its Digital Commodity Intermediaries Act (DCIA). The Senate Banking Committee was supposed to claim this honor on January 15 by marking up its companion bill, the CLARITY Act, but that session was scrapped at the last minute when the Coinbase (NASDAQ: COIN) digital asset exchange publicly withdrew its support.

The DCIA largely focuses on clarifying the role of the Commodity Futures Trading Commission (CFTC), which reports to the Ag committee, in regulating digital assets that are commodities, not securities. Given that the new leadership of the Securities and Exchange Commission (SEC) seemingly doesn’t believe any tokens are securities, the CFTC will shoulder the bulk of digital asset oversight.

Thursday’s markup session was a relatively efficient affair, with three proposed Democratic amendments—the ‘ethics’ question (more on this later); preventing fraud at crypto ATMs/kiosks; and prohibiting federal bailouts of bankrupt crypto firms—all swiftly voted down on strict party lines: all 11 Dems voting aye, all 12 Republicans voting nay.

Three Republican-sponsored amendments—aimed at preventing foreign adversaries from meddling in U.S. crypto markets; protecting Americans’ data from those same dastardly foreigners; and clarifying the scope of broker-dealer activities—by Tommy Tuberville (R-AL) and Jerry Moran (R-KS) were withdrawn by their sponsors before they could be voted on, despite some Dems indicating their willingness to support the measures.

Overall, there was a palpable partisan urgency to move the bill forward, which was ultimately done by the same 12-11 party-line margin. Before the voting began, several Dems, including the committee’s ranking member Amy Klobuchar (D-MN) and Cory Booker (D-NJ), the Dems’ point person in the DCIA negotiations, commented on the partisan nature of the affair after what they felt were good-faith talks before the holidays that got them to this stage.

Throughout the session, committee chair John Boozman (R-AR) said he appreciated the efforts of those proposing amendments and even agreed with some of these efforts. But Boozman insisted that these issues were either the proper jurisdiction of the Banking committee or could be resolved on the Senate floor if/when a finalized market structure plan is ready for a vote.

Despite the unprecedented sight of Congress advancing digital asset market structure legislation, the fiat value of the BTC token began a steep nosedive as the markup session was getting underway. The price dropped by around $3,500 in just 90 minutes and continued to fall throughout the day, dipping below $82,000 as of Thursday evening after starting the day closer to $88,000. You know, it’s almost as if ‘regulatory clarity’ was never the real issue preventing a speculative token from finally making it ‘to the moon.’

White House gets involved in stablecoin yield impasse

Before the full Senate gets a chance to vote on market structure legislation, the Ag committee’s version will need to be reconciled with the Banking committee’s draft. But with both the banking and crypto sectors digging in their heels over the Banking draft’s stablecoin ‘yield v rewards’ language, a frustrated White House has begun applying pressure directly to this wound.

The ‘yield v reward’ argument stems from the GENIUS Act’s prohibition on stablecoin issuers offering yield/interest to customers holding their tokens. Banks want this prohibition extended to third-party platforms like Coinbase, based on concerns that their depositors will transfer funds from their accounts to crypto platforms that offer higher yields/interest/rewards, with Sidney Sweeney.

The banks claim this ‘mass deposit flight’ will negatively impact their ability to offer loans, with particularly negative impacts on smaller community lenders. The crypto sector rubbishes this view, accusing banks of simply not enjoying the prospect of having to compete with crypto platforms for customers’ loyalty.

On Wednesday, Reuters reported that the White House has summoned representatives from both sides for a meeting this Monday (Feb. 2). Bloomberg reported that Coinbase will be among the companies representing the crypto side, but cautioned that the meeting could be delayed if the odds of compromise appear as slim as they do now.

Right after Coinbase pulled its support for the Banking draft, White House crypto advisor Patrick Witt tweeted his displeasure, warning that crypto operators “might not love every part of the CLARITY Act, but I can guarantee you’ll hate a future Dem version even more.”

This week, Witt went further, saying passing market structure legislation will “require some folks to make difficult decisions that might hurt one part of their business but ultimately will allow the rest of their business to thrive.”

Witt stressed that he was addressing “both sides” of this debate, “not just exchanges.” But he reiterated his warning not to make the perfect the enemy of the good just because “there are one or two things in here that to any one individual player might be detrimental.”

Following Coinbase’s withdrawal of support for CLARITY, the White House was said to be annoyed with the exchange’s last-minute grandstanding. Coinbase CEO Brian Armstrong denied these reports but has since spent a lot of time/effort buttering up Trump.

This week, Coinbase announced it had joined an initiative to support the administration’s new ‘Trump Accounts,’ the tax-free savings plan for U.S. kids that the government is seeding with an initial $1,000 deposit. Armstrong said Coinbase would match this $1,000 for “all eligible children of Coinbase employees.” If possible, Armstrong said its contributions would be made in BTC. (So, given Thursday’s plunge, make that $900.)

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Yield v reward narrative slapfight

Both sides of the stablecoin yield debate have cited data they claim support their respective views, and as the argument rages, these reports keep on coming. This week, Standard Chartered Bank’s (NASDAQ: SCBFF) head of digital assets, Geoff Kendrick, claimed that if stablecoin yield offerings are allowed to spread, $500 billion in deposits could leave bank accounts in industrialized nations by 2028, plus another $1 trillion exiting banks in emerging markets.

Kendrick also claimed banks “face a threat as payment networks and other core banking activities shift to stablecoins.” McKinsey analysts recently put 2025’s stablecoin payment volume at ~$390 billion, a mere 0.02% of the global total, but growing quickly.

A contrary view came from a Bloomberg op-ed by Niall Ferguson and Manny Rincon-Cruz titled Stablecoins Are the Future But Banks Will Survive. The authors claim the banks’ argument that customers will empty their accounts and move everything into stablecoins “strains credulity.”

The article closes by saying banking’s position that “stablecoins are a source of instability—and interest-bearing ones especially so—is a bad one. The opposite is quite likely to be true.” The authors cite the GENIUS Act’s requirements that stablecoin issuers keep their fiat reserves in U.S. Treasury bills (and other guaranteed vehicles), and these purchases will help the government keep its lights on.

But banks have another argument up their sleeve. Earlier this month, PNC Bank CEO Bill Demchak was asked about the stablecoin threat on the company’s FY25 earnings call. Demchak responded by saying stablecoins are “marketed and touted as a payment mechanism … but it isn’t marketed nor is it regulated as an investment vehicle. And I think if they actually wanna pay interest on it, then they ought to go through the same [regulatory] process” as banks.

Demchak added that an interest-bearing stablecoin “looks to me an awful lot like a government money market fund. I think banks are sitting here saying, ‘if you want to be a money market fund, go ahead and be a money market fund. Wanna be a payment mechanism? Be a payment mechanism.’ But money market funds shouldn’t be payment mechanisms, and you shouldn’t pay interest … the crypto industry has a lot of lobbying power to say, ‘no. We want it all.’ But we’ll see how this plays out.”

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Tether on banks’ side?

Coinbase’s interest in preserving its ‘rewards’ program is simple: it earns one-fifth of its revenue from stablecoins. Nearly all of this is based on the USDC token issued by Circle (NASDAQ: CRCL), in which Coinbase holds significant equity (a minority position, but Coinbase somehow earns more off USDC than Circle).

Meanwhile, Circle leans heavily on all its exchange partners to boost USDC’s profile, and most exchanges appear similarly aligned with opposing the banks’ efforts to apply the GENIUS rules to third-party platforms.

But not all of the sector’s major players share this view. On January 28, Brogan Law’s Veronica Irwin reported that Tether, issuers of the market-leading USDT stablecoin, has been telling members of Congress that it supports the Banking draft’s yield restrictions. Representatives of Tether’s U.S.-facing operations are also reportedly telling Congress that Coinbase’s opposition doesn’t represent the overall sector’s stance.

The Coinbase/Circle tandem has often appeared to view Tether as a foreign interloper horning in on their U.S. turf. Irwin notes that the flurry of U.S. exchanges that rushed to announce their listing of Tether’s new USAT token this week didn’t include Coinbase, despite the latter’s oft-stated policy of listing nearly every token and ‘letting the market decide’ whether or not these tokens are legit.

Following Irwin’s report, Tether CEO Paolo Ardoino told The Block that the company wasn’t taking a firm position on the yield v rewards fight. “Tether doesn’t share yield. So we don’t have much beef in this fight.” Perhaps, but Tether probably wouldn’t object if those who do rely on these revenue streams happen to take a fall.

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Fairshake flexes, Tether PAC wakes up

In predictably subtle-free fashion, the Fairshake political action committee (PAC) chose the day before the Ag committee markup to reveal that its 2026 midterm election war chest now stands at $193 million. That’s $60 million more than what Fairshake and its two offshoots—Defend American Jobs (pro-GOP) and Protect Progress (pro-Dem)—spent during the 2024 U.S. election cycle.

Last July, Fairshake’s coffers contained ~$140 million, but two of its charter members—XRP issuer Ripple Labs and the Andreessen Horowitz (a16z) venture capital group—contributed an additional $25 million and $24 million, respectively, to the PAC before 2025 drew to a close.

Both Ripple and a16z struck a markedly different tone than Coinbase (Fairshake’s other main contributor) following the Banking markup cancellation, appearing to suggest that Coinbase’s maximalist position was akin to throwing out the baby with the bathwater. So are these three crypto amigos waging war behind the scenes?

A Fairshake spokesperson told Politico that the PAC’s contributors are “united behind our mission … to oppose anti-crypto politicians and support pro-crypto leaders.” And to make sure politicians of any persuasion understand the implicit threat facing them before they vote on crypto legislation.

Meanwhile, The Fellowship PAC has taken its first tangible step towards crypto advocacy after debuting last September with claims of a “$100M+” bankroll. On January 23, The Fellowship’s X account issued only its second tweet ever and its first since that September debut, praising efforts to pass market structure legislation and urging Congress to “[p]ass CLARITY now.”

This tweet was accompanied by a link to a new website, Claritymustpass.com, which offers a brief summary of the bill and a link to a Banking fact sheet. The site also provides text for a letter advocating for CLARITY’s passage and a link to email this message to your local senator.

The Fellowship appears to be under Tether’s control, but neither Tether nor CEO Ardoino has officially copped to controlling the PAC, despite The Fellowship’s lofty claim that “[t]ransparency and trust is our differentiator.”

Recall that The Fellowship’s mission statement offered a thinly veiled shot at Fairshake and its Coinbase/Circle connections, dismissing “past political efforts” that served “narrow or individual interests.” (Has anyone thought of doing a Real Housewives of Crypto series ahead of the midterms?)

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Ethics shmethics

Speaking of narrow or individual interests, the ‘ethics’ amendment that the Ag committee rejected would have prevented elected officials and their families from profiting off crypto ventures. Boozman deflected these concerns, saying the matter was beyond Ag’s scope and better left up to Banking or the full Senate to handle.

Elissa Slotkin (D-MI) noted that the committee’s GOP members would be having “a conniption” if it were former President Joe Biden earning nearly a billion dollars—as Trump’s family is estimated to have reaped from its crypto ventures in just the past 12 months—while simultaneously eliminating regulatory constraints on those ventures.

The morning of the hearing saw Politico join the list of major media outlets attempting to quantify the enormity of Trump-linked crypto ventures. Referencing the national trust charter application filed this month by the Trump-linked (38% ownership) decentralized finance platform World Liberty Financial, former SEC crypto policy staffer Corey Frayer called it “a pretty straightforward smash-and-grab while the president has control over economic and regulatory policy.”

With Democrats looking likely to regain control of the House of Representatives following November’s midterms, Sen. Chris Murphy (D-CT) mused that he’d like to see “endless investigations to try to get to the bottom of [Trump’s] corrupt schemes.”

An unidentified ‘crypto industry official’ echoed this view, suggesting “a shitload of heat” could fall on the sector if Dems are victorious in November and look to overcompensate for the GOP’s disinterest in reining in Trump’s more blatant cash-grabs.

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Deputy AG’s crypto holdings in Dems’ ethics spotlight

The ethics watch isn’t limited to the Trumps, as six Dem senators wrote a letter to Deputy Attorney General Todd Blanche on Wednesday “pressing him on his decision last year to disband the Department of Justice’s (DoJ) National Cryptocurrency Enforcement Team (NCET) and terminate investigations and prosecutions into the tools used to facilitate cryptocurrency crime, in light of recent reporting that he held more than $150,000 in cryptocurrency at the time of the decision.”

The letter details Blanche’s crypto disclosures, which in January 2025 showed him owning “between $158,000 and $470,000, mostly in Bitcoin and Ethereum.” The following month, Blanche agreed to divest his crypto assets “as soon as practicable,” but this divestment didn’t occur until some point between May 31 and June 3, nearly two months after he scaled back the DoJ’s crypto enforcement activities.

The letter goes on to cite stats showing illicit crypto activity was up 162% last year, driven by crypto-fueled sanctions evasion, drug trafficking, and “Chinese money laundering networks.” Addressing Blanche directly, the letter twists the knife by saying “the fact that you held substantial amounts of cryptocurrency at the time you made this decision [to disband the NCET] calls into question your own motivations.”

The senators suggest that Blanche could be in violation of 18 U.S.C. § 208(a), the federal law governing ‘acts affecting a personal financial interest,’ willful violations of which can result in a maximum penalty of five years in prison.

The senators have asked Blanche to respond to several questions on this subject by “no later than February 11.” Fearless prediction: Blanche will respond by saying he’s done nothing wrong and effectively daring the senators to do something about it, knowing that their minority position leaves them virtually powerless to do much beyond writing more letters. Ain’t politics grand?

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