DeFi regulation fight derails U.S. crypto bill, odds of passage collapse to 17%

Key Takeaways 

Will the upcoming meeting resolve the Democrats hold-out?

This could be the end-goal, but market expectation was very low.

What’s the bone of contention in Congress? 

The controversial DeFi regulation proposal by Democrats irked the industry and Republicans at large. 

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The crypto market structure regulation has hit the fan amid Congress fall-out. This followed a push by the Senate Democrats to regulate decentralized finance (DeFi).

Republicans, in response, withdrew from engagements, further putting the year-end deadline for passage of the bill into limbo.

Now, crypto executives will meet with the pro-crypto Senate Democrats on the 22nd of October, likely to resolve the stalemate. 

According to former FOX Business reporter Eleanor Terrett, the crypto leaders will include Coinbase CEO Brian Armstrong, Galaxy’s Mike Novogratz, Uniswap [UNI] CEO Hayden Adams, and others. 

Democrats’ hard stance

For closure, the Senate’s version of the crypto market structure bill has not made it out of the committee yet. 

The stand-off between Republicans and Democrats on the scope and certain key areas has complicated the path forward for the bill.

Pro-crypto Senate Democrats, led by Reuben Gallego, blamed Republicans for ‘crashing out.’ 

Jacques Petit, spokesman for the Sen. Gallego, told Politico that, 

“They (Republicans) asked for paper and substance, and we delivered. They then turned around and leaked our proposal and pretend to be surprised that our parties have policy differences.”

In response, the representative for Senate Banking Chair, Tim Scott, slammed Democrats, adding that the proposal wasn’t in a “good faith” for the market structure bill. 

“The document was not written in legislative text, included multiple incoherent policy ideas, and was not a good-faith effort to engage on market structure.”

For Blockchain Association, the umbrella body that champions for crypto advocacy, the proposal was “dissapointing.”

Worth pointing out that the stalled draft is totally separate from the one advanced from the House (the CLARITY Act) in July.

A harmonized version, if achieved, should pass a Senate floor vote. After that, it will go back to the House before hitting the president’s desk to be signed into law.

Republicans had initially planned to advance the bill from committee by the 30th of October and pass it to law by the end of the year.

But with the chaos, Polymarket showed there was only 17% chance it could become a law by the end of 2025. That’s a 60% drop in market expectations seen mid-July.