Key Senate Democrat advocates for progress on U.S. cryptocurrency legislation, while SEC chair warns of potential setbacks.

Senator Mark Warner, a prominent Democratic negotiator on the market structure legislation, expressed his desire for its passage, while SEC Chairman Paul Atkins stated that sustainable policy indeed necessitates it.

U.S. Senator Mark Warner continues to express his intention to push forward a crypto market structure bill. (Chip Somodevilla/Getty Images)

What to know:

• During a U.S. Senate Banking Committee hearing today, SEC Chairman Paul Atkins indicated that establishing permanent crypto policies truly requires legislation, despite the authority he claims his agency possesses to create rules that can function temporarily.
• Despite sporadic progress on the U.S. Senate bill aimed at regulating crypto market structure, one of the key Democratic negotiators, Senator Mark Warner, stated in the hearing that he remains committed to advancing the initiative.

Regardless of the circumstances, the U.S. crypto sector is anticipated to receive formal policy that stipulates how various digital assets will be treated by different federal agencies. The challenge is that this policy may not endure.

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SEC Chairman Paul Atkins is focused on moving away from the “head in the sand” stance he claims his predecessors adopted regarding crypto policy, and he is prepared to implement rules that provide the industry with the regulatory clarity it seeks. However, the caveat is that such regulations may not be permanent and could be revoked through the same type of commission vote that establishes them. They would not be safeguarded by specific legislation that would protect them from future administrations.

"We require a solid foundation in statute to prevent any regression in the future," Atkins conveyed to the Senate Banking Committee during his testimony on Thursday. Regardless of his eagerness to provide the industry with innovation-friendly regulations, they are not "future-proof."

However, the legislation in the U.S. Senate intended to regulate these matters is struggling to progress. Crypto executives and bankers have been unable to reach an agreement on one of the contentious issues surrounding stablecoin rewards programs. Additionally, Democratic lawmakers have not received satisfactory responses to several of their primary concerns, such as the complete staffing of regulatory commissions and the potential for conflicts of interest when senior government officials maintain significant business relationships with crypto (notably, in their view, President Donald Trump).

Senator Mark Warner, a principal Democratic negotiator on the Digital Asset Market Clarity Act, which still awaits a hearing in the banking committee, stated that a substantial bipartisan coalition remains actively engaged in the legislation.

"We aim to finalize this," he remarked, indicating that Democrats have not yet abandoned the discussions. "It must be accomplished safely."

His main concern revolves around decentralized finance (DeFi) and ensuring that malicious actors do not exploit it for illegal activities. Warner’s stance on this issue has, at times, unsettled the industry and has been perceived as a potential risk to the future viability of DeFi projects. Nevertheless, the current discussions regarding the bill’s approach to illicit finance have not yet reached a consensus.

"We need to ensure that we do not establish a framework that permits bad actors or creates enforcement loopholes," Warner stated.

Republican Senator Bernie Moreno expressed sympathy for the SEC chairman, stating, "Congress has failed miserably to provide you with laws."

Atkins reiterated that his agency possesses "considerable authority" to draft rules that establish a clear regulatory framework for crypto businesses, as he has been attempting to implement with his "Project Crypto" initiative. However, he noted that the rules would require legislation to provide foundational support.

"I believe we do need a solid law coming from Congress," Atkins stated.

Read More: The big U.S. crypto bill is on the move. Here is what it means for everyday users

A similar version of the Clarity Act has already been approved by the House of Representatives last year. Additionally, another version recently passed through the Senate Agriculture Committee in a party-line vote. Nonetheless, when it is time for the full Senate to vote on a comprehensive market structure bill, the industry will require the backing of at least seven Democrats like Warner—possibly more if Republican support is not unanimous.

While Senate Banking Committee Chairman Tim Scott expressed optimism on Thursday regarding the Clarity Act, even industry leaders such as Coinbase CEO Brian Armstrong have indicated a willingness to withdraw support if the policy does not align with their expectations. Furthermore, Treasury Secretary Scott Bessent criticized crypto-industry “nihilists” who are prepared to obstruct progress, suggesting they should relocate to El Salvador if they oppose robust regulation.

The foundational support that Atkins requires for the SEC’s forthcoming rules remains uncertain, although the White House has instructed negotiators to identify common ground before the end of the month. As House Financial Services Committee Chairman French Hill pointed out, time is of the essence.

Read More: SEC’s Paul Atkins grilled on crypto enforcement pull-back, including with Justin Sun, Tron