Recent updates indicate that negotiations surrounding the digital asset market structure bill have made significant progress, with both Democratic and Republican lawmakers reaching consensus on several key provisions. However, five critical areas remain points of contention, potentially delaying final agreement.
Reportedly, Democrats have shown willingness to accept substantial portions of the Republicans” Responsible Financial Innovation Act draft. Despite this, they are staunchly holding firm on issues related to ethics, illicit finance, token classification, and restrictions on stablecoin yields as outlined in the GENIUS Act.
Sources close to the negotiations reveal that the Democrats insist on stringent measures to address illicit finance loopholes, including a proposed ban on digital asset services linked to known malicious actors such as North Korea. This aim is to safeguard the U.S. financial ecosystem from potential threats posed by digital currencies.
Moreover, the Democratic negotiators are advocating for the implementation of “risk-based tools” that would empower regulators to scrutinize platforms that may facilitate money laundering, terrorist financing, and sanctions evasion. They also seek to extend existing anti-money laundering regulations to cover emerging risks associated with digital asset transfers, all while ensuring the protection of privacy rights and due process.
On the ethics front, the Democratic Working Group is pressing for legislation that would prevent elected officials from profiting from digital asset initiatives while in office. They argue that such practices undermine public trust and confidence in both democracy and the digital asset sector.
Furthermore, a crucial concern for the Democrats is ensuring bipartisan representation within regulatory agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission. They contend that prior dismissals of Democratic Commissioners undermine the intended balance of representation necessary for effective regulation.
As part of the negotiations surrounding the GENIUS Act, which is recognized as the first comprehensive stablecoin legislation, Democrats are advocating for measures that would prohibit intermediaries from offering or issuing yields on stablecoins. They argue that allowing yields could divert deposits away from community banks, negatively impacting local financial systems.
Insiders suggest that while the demands presented by the Democrats are significant, they may only reflect a moderated version of their original proposals, hinting at more aggressive requests that remain undisclosed.
The ongoing discussions highlight the complexities of regulating digital assets and the need for a balanced approach that fosters innovation while addressing risks associated with the burgeoning sector.
