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The U.S. Senate Banking Committee has postponed discussions on a pivotal digital asset market structure bill, citing ongoing negotiations and industry pushback. The move comes as Coinbase, one of the largest crypto platforms, withdrew its support for the CLARITY Act due to concerns over regulatory restrictions. The bill had faced mounting criticism from industry leaders, particularly over provisions targeting stablecoin rewards and tokenized equities according to market reports.

Bitcoin and other major cryptocurrencies saw price declines following the news, with BTC falling below $96,000. The market's reaction suggests traders are pricing in uncertainty, with further regulatory delays creating a cloud over the sector. The move also raises concerns about the broader regulatory landscape for digital assets in the U.S. as Bloomberg reported.

Senate Banking Committee Chair Tim Scott emphasized that bipartisan negotiations are still ongoing, and no new date has been set for the markup session. The delay is seen as a procedural pause rather than an outright rejection of the bill. However, industry stakeholders argue that the current draft of the bill still contains harmful provisions that could stifle innovation and limit competition according to Bitcoin Magazine.

Why Did This Happen?

Coinbase CEO Brian Armstrong cited multiple issues with the CLARITY Act, including restrictions on stablecoin rewards, the erosion of the CFTC's authority, and prohibitions on DeFi that could impact user privacy. Armstrong stated that the firm would rather see no bill than one that harms the industry. His comments were echoed by other crypto advocates, who argue the bill tilts too far in favor of traditional financial institutions as reported by Bitcoin Magazine.

The CLARITY Act aims to establish a comprehensive regulatory framework for digital asset markets. It proposes dividing oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). However, critics argue the bill gives the SEC too much power over crypto activities, particularly in areas like tokenized equities and stablecoin yields according to Cointelegraph.

How Did Markets React?

Bitcoin and Ethereum prices both fell shortly after the Senate's announcement, with BTC dropping 1% to around $96,000. The decline reflects market uncertainty over the regulatory outlook. Stablecoins, which are central to the crypto ecosystem, also faced scrutiny. Coinbase, for instance, offers rewards on Circle's USDC stablecoin, a practice that could be curtailed under the proposed bill according to Cointelegraph.

The market's bearish move has raised concerns about further regulatory delays. Some analysts suggest the bill could be restructured before any new markup. However, with key industry players like Coinbase withdrawing support, the chances of a swift resolution appear dim according to Bitcoinist.

What Are Analysts Watching Next?

Regulatory clarity remains a top priority for the crypto industry. Analysts are closely watching how the Senate Banking Committee and other lawmakers respond to the industry's concerns. The outcome could determine whether the U.S. maintains its competitive edge in the global crypto market as noted by Bitcoin Magazine.

Stablecoin regulation is a key sticking point. While banks and lawmakers argue that banning stablecoin rewards protects financial stability, crypto firms argue that such restrictions could drive users to offshore platforms. The debate highlights the growing divide between traditional finance and crypto innovation according to FXStreet.

Analysts also note that the delay could impact broader U.S. regulatory timelines. With other major markets developing their own frameworks, the U.S. risks falling behind if it fails to provide clear rules for the industry. This concern was echoed by Dea Markova, director of policy at Fireblocks, who warned that the U.S. could become one of the few major crypto hubs without a clear regulatory framework according to Reuters.