Welcome to the Tuesday edition of the Crypto In America newsletter!
What you’ll read: Everything you need to know ahead of the Senate’s pivotal vote on the Clarity Act, including a last-minute counteroffer from Senate Democrats, Republican pushback and a new White House initiative aimed at countering the banks’ deposit flight argument.
Good morning from Washington, D.C., where later today the Clarity Act will face its first big test on the Senate floor.
In order to advance, the bill needs 60 senators to vote to invoke cloture and move toward formal floor debate. Getting this far has taken over a year of Senate negotiations and more than five years of attempts by Congress to pass comprehensive crypto market structure legislation.
The 2:15 p.m. vote comes after Senate Republicans released updated text Sunday evening that they say makes major concessions on ethics, software developer protections and the Ag title, while adding a new “circuit breaker” aimed at addressing concerns that stablecoin yield could drive deposit flight from community banks.
In all, Republicans say the draft incorporates 126 substantive changes requested by Democrats.
But Democrats still aren’t satisfied.
Late Monday, Senate Democrats sent Republicans a counteroffer responding to changes in Republicans’ latest text, according to two people familiar with the proposal. It does not seek further changes to the stablecoin yield provisions, an issue sources have described as “Republican-only.”
On ethics, Democrats are seeking additional restrictions on large crypto holdings, dependent children and paid crypto promotions. On the Blockchain Regulatory Certainty Act, they want further changes to narrow the scope of the provision and affirmatively state that nothing in it modifies criminal law, while their Ag title changes include tighter rules around exchanges and conflicts of interest, and protections for Tribal gaming laws.
Republicans are pushing back.
“In response to a significant step in their direction, Democrats have chosen to move the goalposts again,” Senate Banking Committee spokesperson Jeff Naft said in a statement. “Republicans made 126 substantive changes at Democrats’ request, including major changes to address their ethics concerns. Yet we are hearing the same unreasonable asks and the same refusal to take yes for an answer. The final text is public.”
The new counteroffer follows comments from several key Senate Democrats, including Mark Warner (D-VA), Ruben Gallego (D-AZ) and Raphael Warnock (D-GA), who have said the ethics proposal signed off on by President Trump still needs work. Senator Elizabeth Warren’s (D-MA) objections go further, arguing the new ethics language gives Trump administration officials too much control over enforcement and leaves loopholes that would allow the president to continue profiting from some of his existing crypto interests.
Senator Catherine Cortez Masto (D-NV), who has been the face of Democratic negotiations over the Blockchain Regulatory Certainty Act, is said to be behind the further changes to the provision, despite pushback from both the industry and Congressional Republicans over concessions already made to address her concerns, including the removal of explicit criminal protections.
It’s unclear whether Senate Republicans, who called the text released Sunday evening their “last, best and final” offer, will be open to making further changes ahead of the vote or tell Democrats they need to vote to get on the bill if they want to see further changes.
Speaking to Crypto In America Monday, White House Crypto Council Executive Director Patrick Witt suggested there was little appetite for further negotiation.
“If there are any changes, we’re talking about punctuation at this point or technical changes,” Witt said. “I view that as definitely a best and final offer.”
Senator Kirsten Gillibrand (D-NY) has been privately urging her Democratic colleagues to vote to get on the bill and continue negotiations on the floor, according to Politico.
And the banking lobby isn’t backing down without a fight.
Eight banking trade groups, including the American Bankers Association and Independent Community Bankers of America, pushed back on the new text Monday, saying the deposit flight “circuit breaker” added by Republicans is “not a safeguard at all” because it would only kick in after substantial deposit flight had already occurred.
The circuit breaker would effectively act as a backstop, allowing the Treasury Secretary to intervene if there is evidence of widespread movement of deposits from community banks to stablecoins.
In a letter to Senate leaders, the groups once again called for further tightening of the stablecoin rewards language to close what they describe as loopholes that could still allow interest-like payments on stablecoin balances.
The White House is pushing back, too.
The Council of Economic Advisers this morning launched a new interactive tool that allows users to test the banking industry’s deposit flight argument for themselves. It builds on earlier CEA analysis that found “no meaningful relationship between stablecoin growth and community bank deposit flight.”
Witt had some strong words for the banks Monday, arguing that Republicans had already gone to significant lengths to address their concerns, including through the new circuit breaker.
“If you oppose the Clarity Act because you just hate crypto, that’s fine. Just say that,” Witt told Crypto In America, adding that he questions the “good faith nature” of the banks’ continued objections.
That continued opposition could matter for the Republican whip count.
Some Senate Republicans remain on the fence amid concerns raised by the banking industry over the stablecoin yield language. Senator John Curtis (R-UT) told reporters he would vote to get on the bill this afternoon but remains a no on final passage over the banks’ objections. Senators John Cornyn (R-TX) and Susan Collins (R-ME) told reporters they’re still considering how to vote.
One development that helps Republicans with the raw headcount: Senator Mitch McConnell (R-KY) returned to the Senate Monday night after a three-month absence. In an X post, McConnell said, “I will do my best to be present for tough votes when our Conference needs me.”
Today’s Clarity Act vote could prove to be one of them.
Witt, for his part, told Crypto In America he feels “very good” about the vote, but acknowledged that the final outcome may have little to do with the substance of the bill.
“Whether or not we get 60 votes is going to be a political calculation, not a policy calculation,” he said.
Want breaking updates on today’s vote? Crypto In America’s Eleanor Terrett will be on the ground in Washington covering the action. Follow her updates on X here.
Georgetown’s Financial Markets Quality Conference returns September 23
Join Georgetown University’s Psaros Center for its annual Financial Markets Quality Conference, bringing together leaders from finance, government and policy.
This year’s agenda features digital assets, tokenization, prediction markets, private markets and financial regulation, with speakers including CME CEO Terry Duffy, JPMorgan Asset & Wealth Management CEO Mary Callahan Erdoes, Sen. Bill Hagerty (R-TN), NEC Director Kevin Hassett, former Treasury advisor Tyler Williams and White House Crypto Council Executive Director Patrick Witt.
Location: Wednesday, September 23 | Georgetown University | 8:00 a.m. - 5:00 p.m.
Registration is complimentary, but advance registration is required.
What Else We’re Watching
The Federal Reserve kicks off its two-day policy meeting, with its latest interest rate decision coming Wednesday at 2:00 p.m. ET. Markets are pricing in roughly a 90% chance of a quarter-point rate hike.
Over in the House, the Subcommittee on Innovation, Entrepreneurship, and Workforce Development will hold a hearing at 11:00 a.m. ET on what digital assets mean for small businesses. Coinbase Chief Policy Officer Faryar Shirzad will testify on the importance of crypto legislation and the potential benefits of digital assets for America’s small business owners.
Treasury Secretary Scott Bessent will appear before the House Financial Services Committee to discuss the state of the international financial system.
On Wednesday, the House Ways and Means Committee will mark up a crypto tax bill at 10:00 a.m. ET, the latest congressional effort to establish clearer tax rules for digital assets.
The democrats don't even know what ethics are.
This piece called it before the vote even happened — Witt saying flat out the outcome would be "political, not policy" was the tell. It failed 49-50 last night: four Republicans (Collins, Hawley, Moran, Tillis) voted with every Democrat. All those changes — 126 of them, plus a new safety valve on the stablecoin-yield fight — didn't flip one vote that mattered. Does the fix here look like new bill text, or does it actually need different senators in the room?