## Senate Agreement on Cryptocurrency Falling Apart Amid Deep Policy Divides

The US cryptocurrency industry is racing against time to pass a new regulatory framework, but deep disagreements among political factions are gradually breaking down the prospects of reaching an agreement. The battle over the Digital Asset Market Clarification Act of 2025 (H.R. 3633) reveals a fundamental conflict: Republicans want to quickly establish basic rules, while Democrats are proposing a series of strict requirements that could fundamentally change the nature of the bill.

According to analysis from Galaxy Research, a meeting between the two sides on January 6 exposed an irreconcilable divide over approaches to DeFi (decentralized finance). Democrats are demanding the application of "sanctions compliance at the user interface" for DeFi platforms, requiring developers to verify users at access points, and expanding the oversight authority of the Department of the Treasury. Additionally, they want to create a new regulatory category for "not fully decentralized" DeFi projects — an ambiguous definition that could encompass many existing protocols.

### Investor Protection Proposals Bring New Pressure

Democrats' demands extend beyond DeFi. They are pushing for new regulations on crypto ATMs, expanding the enforcement powers of the Federal Trade Commission (FTC), and most importantly — limiting stablecoin issuers to a maximum of $200 million in fundraising under certain exemptions.

This proposal overturns the entire current compliance machinery. Instead of waiting to be enforced, protocols will have to proactively contact the Securities and Exchange Commission (SEC) to declare they are not securities. This "game-changing" move imposes significant compliance burdens on early-stage projects and complicates legal risks many times over.

### The Real Battle: Stablecoin Yields

While the debate over DeFi is technical, the fight over stablecoin yields has become a fundamental financial conflict of interest between traditional banking and the crypto industry.

US banks have lobbied fiercely against allowing stablecoin issuers to transfer yield from reserve assets (such as Treasury bills) to holders, arguing that this would drain deposits from the banking system. However, crypto companies argue that these concerns are merely trade protectionism.

Coinbase’s policy director pointed out a shocking economic reality: US banks earn about **$176 billion annually** from over $3 trillion in reserves at the Federal Reserve. Plus, **$187 billion annually** from card swipe fees (average $1,440 per household), bringing total revenue from payments and deposits to over **$360 billion per year**. Stablecoin yields are just a minor threat compared to this enormous revenue stream.

Data from Charles River Associates (Summer 2024) shows **no significant statistical correlation** between USDC growth and bank deposits among community banks. Stablecoin users have different needs, using it for other purposes — they do not see it as a replacement for traditional bank deposits.

Alexander Grieve from Paradigm fund also points out the stark reality: if banks destroy the market structure, the current "doomsday" scenario will still **persist**. In fact, according to a December study, stablecoins actually support credit creation rather than destroy the system.

### Big Tech’s Ambitions for Regulation

For Ripple, the Clarity Act is not just about avoiding lawsuits — it’s a gateway into a completely new business model. The company currently holds a US national banking license and seeks access to the Fed linked with RLUSD stablecoin. The recent acquisition of Hidden Road — a platform handling **$3 trillion annually** for over 300 clients — signals a strategy focused on activities requiring a federally regulated environment: custody, collateral segregation, operational controls ready for audits.

Coinbase also sees similar potential, with CEO Brian Armstrong stating that the Clarity Act "will unleash builders" through clear rules.

### Pressure from Global Competition

The most urgent driver is not from the crypto industry itself, but from geopolitics. Global rivals are rapidly establishing competitive rules.

Europe has implemented the Markets in Crypto-Assets (MiCA) regulation, with the European Securities and Markets Authority (ESMA) releasing detailed implementation templates providing a clear compliance roadmap. In Asia, hubs like Hong Kong and Singapore are designing specific regulations to attract liquidity flows from US companies.

Senator Cynthia Lummis emphasized: "For too long, vague regulations have pushed digital asset companies overseas." This jurisdictional gap is the main driving force behind the push for review on January 15.

### Market Framework Is Necessary, But the Path Is Still Rocky

The Brookings Institution pointed out another economic aspect: stablecoins are creating new demand for short-term Treasury bills, helping fund US public debt. A 1% increase in stablecoin demand could reduce short-term yields by **1-2 basis points** — a significant enough impact to warrant the Treasury’s attention.

However, the road from here to an agreement remains fraught with complex obstacles. The Republicans’ aggressive schedule (Thursday, January 15) aims to lock in the framework before the legislative window narrows, but analysis shows that both sides are still unsure whether they can narrow key policy differences quickly enough. If they fail, major crypto companies may have to continue operating in legal ambiguity, while global competitors keep advancing.