Editorial: Trust gap doomed crypto regulatory plan

The Senate’s rejection of the Clarity Act, which would create a new regulatory framework for the  $2.3 trillion cryptocurrency market, was not simply a case of Democrats opposing cryptocurrency or Republicans abandoning President Donald Trump. The decisive obstacle was not uncertainty about Bitcoin’s survival. It was a dispute over ethics, enforcement and public trust.

The procedural vote failed 49-50, falling well short of the 60 votes required. Every Democrat voting opposed the motion, joined by Republicans Susan Collins, Josh Hawley, Jerry Moran and Thom Tillis. Tillis voted no so that he could move to reconsider the legislation later. The result was therefore bipartisan, but hardly an overwhelming rejection of digital assets.

Bitcoin does not require congressional validation to continue functioning or trading. Federal regulators already treat it differently from many other digital assets, and the legislation was principally intended to create a broader framework governing how cryptocurrencies are issued, sold and regulated.

The political debate became dominated by ethics. Democrats argued that the bill did not go far enough to prevent federal officials, including Trump, from influencing cryptocurrency policy while retaining financial interests in the industry. Trump and his family have extensive crypto-related ventures, making the appearance of a conflict inseparable from the legislation.