Crypto regulation push collapses as industry infighting saps support

The cryptocurrency industry’s campaign for a comprehensive U.S. regulatory framework has ended in defeat after the Senate rejected legislation intended to bring digital assets further into mainstream finance, The Wall Street Journal reported late Saturday.The Clarity Act failed to secure the 60 votes needed to advance, capping months of negotiations among lawmakers, crypto companies and banks. The measure had sought to establish clearer rules for digital-asset businesses following years of regulatory uncertainty.Coinbase Global Chief Executive Brian Armstrong emerged as one of the most influential figures in the debate. He made frequent trips to Washington and pushed lawmakers to preserve rewards that Coinbase offers on holdings of the USDC stablecoin.Banks opposed those programs, arguing that interest-like crypto rewards could pull deposits from traditional financial institutions and diminish their capacity to lend. Coinbase maintained that several early provisions would have harmed the broader digital-asset industry.The disagreement came to a head in January, when Armstrong withdrew support for an early version of the bill shortly before a Senate committee vote. Some crypto executives later argued that the industry had lost its best opportunity to reach a deal while political support was strongest.For investors, the bill’s collapse prolongs the regulatory uncertainty surrounding Coinbase and other U.S. crypto companies. Without federal legislation, the industry remains more dependent on SEC decisions, shifting administration policies and future congressional negotiations. That uncertainty could discourage new products and institutional investment while increasing the political risk reflected in crypto-related stocks.Efforts to revive the measure encountered additional problems during the summer. Democrats pressed for tougher ethics rules after President Trump disclosed substantial income from his family’s cryptocurrency ventures. Other legislative priorities, including the war in Iran, inflation and concerns about artificial intelligence and data centers, also competed for lawmakers’ attention.The proposal eventually expanded beyond 600 pages as negotiators attempted to resolve disputes over stablecoins, consumer protections and the treatment of public officials’ crypto holdings. Banks continued lobbying against provisions they considered a competitive threat, while some lawmakers grew frustrated with pressure from the crypto industry.Republicans made a final attempt to attract Democratic support by adding language that would place Trump’s crypto assets in a blind trust. The concession failed to produce enough votes.Coinbase shares fell more than 10% after the Senate setback. They rebounded later in the week after the SEC opened a path for tokenized stocks to trade in the United States, illustrating how strongly the company’s valuation remains tied to regulatory developments.Armstrong defended Coinbase’s negotiating strategy, arguing that its resistance helped improve the legislation even though it ultimately failed. The industry now faces the prospect of starting over after squandering what had appeared to be its strongest political opening yet.Content provided by Seeking Alpha is intended for information purposes only, and that Seeking Alpha does not offer any personalist investment advice and is not a licensed securities dealer, broker, US investment adviser or investment bank.