Senate Delays Crypto Bill After Coinbase Opposition as Zcash and Monero Hit Key Milestones

The U.S. Senate Banking Committee delayed its scheduled markup of the Clarity Act after Coinbase CEO Brian Armstrong expressed strong opposition to the bill. The legislation, which was passed by the House during last year's "Crypto Week," aims to establish a regulatory framework for digital assets. This delay adds uncertainty to the legislative process and could impact the broader adoption of clear market rules for crypto tokens.

Coinbase cited several issues with the current draft of the bill, including provisions that could effectively ban tokenized equities and limit rewards on stablecoins. The firm has been a key player in the bill's negotiations, having contributed millions to political action committees supporting pro-crypto candidates. Armstrong emphasized that the company would "rather have no bill than a bad bill," highlighting the significant stakes for both crypto firms and investors.

Zcash (ZEC) experienced a notable price surge after the U.S. Securities and Exchange Commission (SEC) announced it would not pursue enforcement actions against the privacy coin. The Zcash Foundation stated that the closure of the investigation reflects its commitment to regulatory compliance and transparency. ZEC rose nearly 14% in the 24 hours following the announcement, trading at around $440.

Monero (XMR) also reached an all-time high, hitting $692 on January 12. The rally was driven by renewed interest in privacy-focused tokens and a regulatory crackdown in Dubai, which banned the use of privacy coins on exchanges. XMR's market capitalization surpassed $12 billion, surpassing Zcash in the privacy token space.

Why Did This Happen?

Coinbase's decision to withdraw support from the Clarity Act was based on concerns over several provisions in the bill. These included restrictions on stablecoin rewards, limitations on tokenized equities, and potential erosion of the Commodity Futures Trading Commission's (CFTC) authority. The firm's opposition reflects broader industry concerns over the bill's potential to stifle innovation and restrict financial models that rely on token rewards.

The Zcash Foundation's regulatory clearance came after a two-year investigation by the SEC. The regulator concluded its review of the privacy coin without taking enforcement action, signaling a more favorable regulatory environment under the Trump administration. The outcome was seen as a win for the foundation, which emphasized its commitment to transparency and regulatory compliance.

Monero's price surge was partly fueled by a shift in investor sentiment toward privacy tokens. Dubai's decision to ban privacy coins on exchanges highlighted the growing tension between privacy and regulatory compliance. The move pushed XMR higher as traders sought exposure to assets with strong privacy features according to market analysis.

How Did Markets React?

The delay in the Senate's crypto bill markup contributed to a mixed market reaction. Bitcoin and Ethereum both saw slight declines in the 24 hours leading up to the decision according to market data. However, privacy tokens such as Zcash and Monero showed strong gains, indicating a divergence in investor sentiment.

The Zcash price rally was particularly notable given the broader market context. The cryptocurrency had been under pressure after a mass exodus of developers at Electric Coin Company earlier in the year. The SEC's decision to close its investigation removed a major overhang, contributing to renewed buying interest.

Monero's rally was supported by both market and regulatory factors. The token's all-time high came as Dubai's financial regulator imposed new restrictions on privacy coins. This move pushed XMR higher as investors rotated into privacy-focused assets according to technical analysis.

What Are Analysts Watching Next?

Analysts are closely monitoring the Senate's next steps on the Clarity Act. The bill is expected to undergo revisions as lawmakers seek to address concerns from both the crypto and traditional financial sectors according to industry reports. A potential middle ground could involve allowing only licensed financial institutions to offer rewards on stablecoin balances.

The Zcash Foundation's regulatory clearance is seen as a positive development for the privacy coin. However, the broader regulatory environment for privacy tokens remains uncertain. European regulators are already tightening rules under the Markets in Crypto-Assets (MiCA) framework.

Monero's price performance has drawn attention from market analysts. The token's recent rally suggests growing demand for privacy-focused assets. However, analysts caution that overbought conditions in technical indicators could lead to short-term corrections.

Overall, the regulatory and market developments highlight the evolving landscape for digital assets. Investors are advised to monitor key legislative and enforcement actions, as well as market sentiment shifts, in the coming months.