Updated Senate Banking Committee bill tackles stablecoin rewards, DeFi but sidesteps Trump's crypto conflicts of interest

A fix to the ongoing discussions around stablecoin rewards and language on protecting software developers is in updated legislative text from the Senate Banking Committee, but one growing issue remains absent: how to address President Donald Trump-linked conflicts of interest. 

At about midnight on Monday, the Senate Banking Committee released its 309-page Clarity Act, which the committee's Chair Tim Scott, R-N.C., said showed "good-faith work" among lawmakers.

"This bill reflects serious, good-faith work across the Committee and delivers the certainty, safeguards, and accountability Americans deserve," said Scott. "It puts consumers first, combats illicit finance, cracks down on criminals and foreign adversaries, and keeps the future of finance here in the United States."

"Now it is time to move forward," Scott added.

Later this week, the Senate Banking Committee is slated to hold a markup to amend and vote on a broad crypto market structure bill, regulating the industry comprehensively at the federal level for the first time. 

The committee had initially scheduled a markup in January, but cancelled it at the eleventh hour after major crypto exchange Coinbase pulled its support over concerns, including the treatment of stablecoin rewards. That issue was resolved earlier this month when key negotiators Sens. Angela Alsobrooks, D-Md., and Thom Tillis, R-N.C. released language that blocks certain firms from paying any form of interest for just holding stablecoins, or in any manner "economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit." 

The new text has garnered support from the crypto industry as a whole and Coinbase, but large bank trade groups have since pushed back saying that the language doesn't go far enough. In a letter sent to bank executives on Sunday, American Bankers Association CEO Rob Nichols said the current text would "unnecessarily incentivize the flight of bank deposits into payment stablecoins, putting both economic growth and financial stability at risk."

On Monday night, the text included language from Sens. Alsobrooks and Tillis.

Ethics

The proposed text did not include language to address Democrats' concerns about whether federal officials, including the president, should be allowed to personally benefit from digital assets. In January, Bloomberg estimated that Trump has raked in at least $1.4 billion from his crypto ventures, in part from his and his wife's memecoins and his family's stake in the DeFi and stablecoin project World Liberty Financial. 

Previously, Democrats in the Senate Agriculture Committee proposed amendments that would block the president, vice president, lawmakers, and other federal officials from making certain financial transactions involving digital assets, but were ultimately not included in the bill when it was voted out of that committee in January. Chair Scott has previously said the issue is not within his committee's jurisdiction. 

A spokesperson for Sen. Alsobrooks said there needs to be a compromise on ethics to get Democratic support for the bill. 

"Senator Alsobrooks is still negotiating in good faith with her Republican colleagues to get to a bipartisan markup on Thursday," the spokesperson told The Block. "To get there, there needs to be compromise on ethics."

Another one of the bill's key negotiators,Sen. Kirsten Gillibrand, D-N.Y., has also said that there would be no support for the bill without an ethics provision. 

On Monday night, top Democrat of the Senate Banking Committee Elizabeth Warren said the bill would "turbocharge Donald Trump's crypto corruption" and put the financial system and national security in the U.S. at risk.

"In just one year in office, the President and his family have raked in at least $1.4 billion in gains from crypto deals alone, and yet this bill stunningly includes zero provisions to prevent that," Warren said in a statement. "The American people are watching. No Member of the Committee should support a bill that fails to stop the massive conflict of interests posed by Donald Trump and his family’s crypto ventures."

DeFi

The bill language includes the Blockchain Regulatory Certainty Act, which would clarify that non-custodial developers are not money transmitters. 

BRCA has recently raised concerns among law enforcement groups who say that the language in that provision could make it hard to crack down on financial crime. Earlier in the day, Punchbowl News reported that both Republican Sens. Chuck Grassley and Cynthia Lummis had reached a deal to address those concerns. In January, Grassley and others raised issues with the BRCA and said it it creates "blind spots" for local and state law enforcement.

Earlier on Monday, Sen. Grassley approved the BRCA and language in the bill text directly addressed his and Sen. Catherine Cortez Masto's concerns, according to a person familiar.

On Monday night, the DeFi Education Fund said they are reviewing the bill. 

"We are encouraged by the direction of recent negotiations and note that the most important provisions for developers and infrastructure providers - the BRCA and protections under the Exchange Act - are in this bill," the group said in a post on X. 

Also in the bill is a housing provision that seeks to direct the Securities and Exchange Commission and the Commodity Futures Trading Commission to put forth timelines for future rules for a "pilot program to incentivize housing."