- Senate talks on crypto market structure have restarted, with a possible markup targeted for January 15.
- Stablecoin yield restrictions and DeFi regulation are the most contentious issues dividing lawmakers.
- Political deadlines and banking pressure are accelerating the process, raising the risk of a rushed or fractured outcome.
U.S. senators quietly restarted negotiations this week on a long-awaited crypto market structure bill, reopening a debate that stalled out in last year’s congressional session. According to people familiar with the discussions, talks resumed Tuesday without any major breakthroughs yet, but momentum is building. Senator John Kennedy told Punchbowl News that Senate Banking Committee Chairman Tim Scott is targeting a markup as soon as January 15, a move that could force decisions sooner than many expected.
The timing is awkward, and not by accident. Lawmakers are juggling multiple high-risk priorities at once, including fallout from President Donald Trump’s Venezuela actions, looming federal budget deadlines ahead of a possible January 30 shutdown, and a tightening calendar as midterm elections creep closer. Crypto hasn’t moved to the sidelines. It’s back in the mix, and pressure is rising from every direction.
A Narrow Window and a Politically Risky Markup
If Scott pushes forward with a markup next week, the Senate will likely need to release an updated draft bill, since the last version circulated months ago. Doing so could help avoid crypto being swallowed by broader budget chaos, but it also risks blowing up fragile negotiations. Democrats involved in the talks are still pressing several unresolved issues that could derail bipartisan support if rushed.
Among their demands are stricter ethics rules to prevent senior government officials from profiting from digital asset activity, a clear reference to President Trump’s crypto involvement. They are also pushing for tighter constraints on decentralized finance platforms and limits on crypto yield products that could compete directly with banks. These are not minor details. For the industry, they are potential deal-breakers.
Stablecoins Have Become the Center of Gravity
While market structure is the headline, stablecoins are where the real power struggle sits. The banking industry has made it clear it wants this legislation to revive and reinforce elements of last year’s GENIUS Act, particularly the prohibition on stablecoins paying interest or yield. Bank lobbyists argue that allowing yield-bearing stablecoins, even indirectly through affiliates or “reward” programs, would accelerate deposit flight and weaken bank lending to the real economy.
Their concern is not hypothetical. Stablecoin growth already presents a competitive alternative to traditional deposits, and banks fear that yield would tip the balance during periods of stress. Democrats echo parts of this argument, warning that yield structures undermine the intent of the GENIUS Act and could amplify systemic risk. Crypto firms, unsurprisingly, see this as an attempt to freeze innovation and protect incumbents.
DeFi and Illicit Finance Remain Sticking Points
Beyond stablecoins, DeFi lending is another fault line. Critics argue that DeFi platforms resemble highly leveraged banks without deposit insurance, capital requirements, or access to a lender of last resort. Lawmakers worry that consumer losses or crypto shocks could spill into the broader financial system if left unchecked.
Illicit finance also remains a recurring justification for tougher rules. Despite past legislation, senators argue that unhosted wallets and internationally operated DeFi platforms are still being exploited by criminal networks to access the U.S. financial system. Whether new legislation can meaningfully address that without overreaching remains an open question.
Why This Moment Matters
Several forces are converging. The House has already passed its own Digital Asset Market Clarity Act and is waiting on the Senate. A federal funding deadline looms. Midterms are approaching. And both parties say they want a deal, even as their red lines remain far apart. If a markup happens next week without compromise, Democrats may be forced to oppose the bill outright, setting the process back once again.
This isn’t just about crypto anymore. It’s about which financial model lawmakers choose to protect, and how much competition they’re willing to allow. The outcome will shape stablecoins, DeFi, and crypto market structure in the U.S. for years, not months.
