Senate crypto bill nears crunch time as amendments pile up, lobbying intensifies ahead of Senate Banking Committee hearing

Lawmakers face a pivotal Senate hearing Thursday with over 70 amendments in play, as debates over stablecoin yield and decentralized finance come down to the wire.

It’s crunch time for crypto advocacy groups, consumer protection groups, banking lobbying organizations — you name it — as letters come in and stances are drawn in the sand on how to move forward with legislation that would regulate the crypto industry as a whole.

“Banking bills rarely become law, but when one has a chance to potentially get across the finish line, it becomes a lobbying bonanza,” said Ron Hammond, head of policy and advocacy at Wintermute, in a statement sent to The Block.

The bill has the necessary momentum, Hammond added, noting that there is a “recognition from all camps” that passing legislation is vital.

The Senate Banking Committee will hold a hearing on Thursday to amend and vote on a bill that draws jurisdiction between the Securities and Exchange Commission and the Commodity Futures Trading Commission. It also seeks to clarify which assets qualify as securities or commodities and establishes new disclosure requirements.

Late Monday, Senate Banking Committee Chair Tim Scott, R-S.C., released 278 pages of bill text, which was then later greeted on Tuesday night with over 70 proposed changes from both Republicans and Democrats. Sen. John Kennedy, R-La., proposed four amendments, some of which give the Treasury Department authority to impose specific sanctions on “distributed application layers.” Another amendment, from Sens. Angela Alsobrooks, D-Md., and Thom Tillis, R-N.C., addresses stablecoin yield.

How to limit third-party platforms — such as Coinbase — from offering yield on stablecoins has emerged as a flashpoint between banking lobbying groups and the crypto industry.

Coinbase CEO Brian Armstrong said Wednesday that Stand with Crypto, founded by the crypto exchange, will be scoring the markup on Thursday. Stand With Crypto grades politicians on an A-to-F scale based on their support for the crypto industry, using public statements, voting records, and surveys.

“We get to find out which Senators stand for bank profits at the expense of the American people, and which stand for consumer rewards,” Armstrong said in a post on X.

Will the SEC stand at the front door?

Many issues will be resolved or ironed out during Thursday’s hearing or throughout the legislative process, said The Digital Chamber CEO Cody Carbone in an interview with The Block.

An issue that has flown somewhat under the radar is concerns from the crypto industry on the first part of the proposed bill, “Title 1- Responsible Securities Innovation,” in part because it gives the SEC the first say on designating certain cryptocurrencies.

“Title One is still pretty concerning to a lot of industry folks,” Carbone said. “The SEC remains the front door.”

The crypto industry has been wary of giving the SEC a lead role in regulating digital assets following the chairmanship of Gary Gensler, who took on more of a “regulation by enforcement” stance and brought charges against big-name firms over not registering with the SEC.

“So that will be very interesting to see if that is debated, or if that is just a settled issue between Republicans and Democrats,” Carbone said.

Notably, the Senate Agriculture Committee, which has jurisdiction over the CFTC, is set to hold a hearing to mark up its bill later this month. Both committees would need to reconcile their bills before it heads to a full Senate vote.

Another issue that has particularly come into focus is around a new title in the bill focused on DeFi, which created a new test to see whether something is decentralized, Carbone said.

“It is very broad, and it would loop in a lot of sufficiently decentralized DeFi participants and force them to comply with certain regulations that they should not comply with or could not comply with,” Carbone said.

It raised alarms among crypto folks, but Carbone said senators have shown a willingness to change DeFi language.

“So that’s why I’m optimistic that whatever is voted on tomorrow will put us in a better place than what came out on Monday at midnight,” he said.

On Wednesday, the DeFi Education Fund posted on X a list of amendments, including ones from Democratic Sens. Elizabeth Warren and Jack Reed, and is asking senators to vote against them.

“While we have not seen the text of these amendments, the descriptions suggest they would seriously harm DeFi technology and/or make market structure legislation *worse* for software developers,” the organization said.

Conflict of interest provisions are out

Democrats have pushed for ethics language to be added to the crypto bill, citing concerns about President Donald Trump and his family’s crypto ventures. Some have called it a “red line” issue. However, as of Wednesday, ethics language will reportedly not be included in the bill.

In an interview with CoinDesk, Senate Banking Committee Chair Scott said that language should instead go through the ethics committee.

Sen. Cynthia Lummis, R-Wyo., told Semafor’s Eleanor Mueller that talks will continue and that the language from the get-go had to be added on later anyways since it is not within the committee’s jurisdiction.

A group of oversight, consumer advocacy, and ethics groups staunchly disagreed with lawmakers that the Senate Banking Committee doesn’t have the authority to impose ethics provisions. In a letter sent to Scott and Sen. Warren, D-Mass., the groups cited concerns over bad actors taking advantage of the crypto marketplace.

“We are therefore alarmed that the digital asset market structure legislation that the Senate Banking Committee will mark up this Thursday does not appear to include adequate provisions addressing government conflicts of interest,” they said in the letter on Wednesday, obtained by The Block. “That is deeply concerning.”

A day earlier, on Tuesday, a group of over 260 labor, civil rights, consumer, environmental, and other organizations sent a letter to the Senate asking for several changes amid concerns about conflicts of interest, consumer protections, environmental impacts on cryptocurrency mining, and others.

“The gaps in the text released by the Senate Banking Committee make it clear that this bill contains deep flaws and fails to meet any of the necessary thresholds to be considered legitimate regulation of the crypto industry,” the groups said in the letter. “Senators must stand up for the public interest and resolutely reject this text.”