"There were surprises in the bill," says Rebecca Rettig, who has been in the room as the Senate Banking Committee crafts the crypto market-structure bill. The ommittee delayed its discussion of the bill after Coinbase pulled its support.

Washington

A major crypto market-structure bill under consideration in the United States has encountered significant debate, particularly regarding the regulation of stablecoin yield, tokenization of real-world assets, and decentralized finance (DeFi). The bill, which spans over 200 pages, has seen numerous amendments and changes since its initial draft, prompting both industry leaders and lawmakers to carefully review its provisions.

Key concerns include the impact of allowing yield on stablecoins for banks and community banks, as well as the scope of regulatory authority over tokenization and DeFi. Ongoing negotiations aim to address these issues, with a companion bill scheduled for markup in the Senate Agriculture Committee. The timeline for passage remains uncertain as stakeholders regroup to consider next steps.

The surprises in the crypto market-structure bill

What is the sticking point here for someone like Coinbase is Brian Armstrong. I think as Lydia said the question around yield for stable coins so whether you can pay rewards on holding stable coins which has been a big source and a big driver of revenue for Coinbase. You can see it in their earnings and even in circles disclosures as well. I think that's a big sticking point. There's also been a big sticking point which is very recent around something called tokenization of real world assets. So taking things like securities and putting them on chain onto a block chain. And this bill had new language that really circumscribed the way that the SEC could regulate the tokenization of real world assets which I think when we're talking about super apps and how we're bringing everything on chain gave a lot of pause to players like Coinbase and others. And then there were a lot of questions around decentralized finance. This idea of an economic industry that is completely on chain without any intermediaries and how that would be regulated too. So I think those are three of the biggest questions that remain outstanding. This is a 200 something page bill and a lot of the big players had to slow down and look through every piece of it before signing on or indicating their displeasure with it. How much of it had changed from what had been originally discussed. I think there were a lot of changes from the September draft that had come out. But look everybody was at the table and having a lot of discussions. We saw both Senate Democrats and Senate Republicans at the table and all sorts of different players whether it be Coinbase or others who had been involved in the process and people in the defy industry as well. But I think there were surprises in the bill and digesting it in 48 hours was a lot as well as there were tons of amendments that were put up that were going to be considered in the markup that was going to be held today. And people didn't have a ton of time to digest those as well. And I think there was concern that some of those amendments may have materially changed the bill for the worse for industry. And so I think that's why there was a lot of hesitation yesterday. And were the amendments tied to the crypto market structure bill or were they kind of off in their own world. They were tied to crypto market structure bill but they looked to change things even more materially on things like surveillance in defy privacy as well as questions around Treasury's jurisdiction. And then again on the yield question for stable coins. So Lydia was telling us how lawmakers want to appease both the crypto industry and the banks with this legislation. Is that possible in one big bill or does it need to be broken apart and maybe tackled separately. So this bill I would say is the most comprehensive all of government type of regulation for any type of financial institutions or financial players since Dodd-Frank. And so that's a lot to digest for sure. Appeasing many different parts of trade by crypto whatever you want to call it will be challenging. But I do think that there's a possibility especially lawmakers are still at the table as Lydia said. An industry is still really willing to be at the table. So I think or I'm hopeful that we can get there. You know even if this looks like a setback I think this may be a way to put forward a product that has even wider support than this last bill did in terms of rewards. The yield that you were talking about for stable coins. Why is this such a nonstarter for banks. Have they indicated any wiggle room on this. They haven't indicated much. And it's not just banks but also community banks who are really important player both across the United States but also in D.C. just given their historic role. And I think the banks are worried that if you're able to offer yield simply unstable coins that are being held it will change the makeup of their deposit base and may actually materially impact their business. And what can the crypto industry offer to community banks in particular to assuage their concerns. You know I will say that's the harder part. And I think there are ongoing negotiations here. I think many people are willing to come to the table with these types of compromises and hopefully we'll keep everyone at the table over the next few weeks and get to a good place on this. So keeping all this in mind and all these different things that need to be resolved. What is the timeline now for something like this to get past. I mean I know that given how large it is how comprehensive it is the fact that it's the biggest since the Dodds Frank bill meant that it was always going to be challenging to get it done quickly. So the interesting part of the bill that was going to be marked up today is it's just on the SEC or the security side also scoped in the Treasury Department. There is a corollary or a companion bill that's going through Senate AG right now. And as we sit here today it's at least scheduled to be marked up the last week in January. So there is a possibility that everybody can maybe take a few days take a deep breath come back to their desks and set this bill again for the same timeline. But you know it very much remains to be seen I think because the markup was pulled so late last night people are regrouping this morning both on the industry side and on the lawmaker side to figure out what's next. OK. As we figure out what's next what will you be watching for most critically. I'll be watching for what actually changes both from the amendment perspective but also there was a lot of dialogue over the last 48 hours between Senate staffers who have done a great job. And look I think the other thing we have to step back and think about is there's a lot going on in the world right now both in the financial markets but also more globally. And that lawmakers on the Senate side have taken the last few months to try to put together this type of bill shows just how far the industry has come even in the last few years. But I'll be looking for what changes because I think there are a lot of productive changes particularly on how to sell tokens into the market which I think will be a big piece of this bill as well as how to treat decentralized finance. There are a lot. There's a lot to be done there.

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Minneapolis

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Jerusalem

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Breakdown