There were no markup hearings this past week on market structure legislation. Lawmakers are still holding their firm positions close to the vest. The question is shifting from “will we get a market structure law this year” to “will Congress have enough time to advance this bill?”
You’re reading State of Crypto, a CoinDesk newsletter examining the relationship between cryptocurrency and government. Click here to sign up for future editions.
The narrative
The Senate Banking Committee announced this week that there would be no markup hearing on its draft market structure legislation, confirming what many had anticipated — that lawmakers simply did not have enough time to finalize this bill this year.
Why it matters
The market structure bill being pushed further to 2026 increases the likelihood that it may not pass at all. To become law, lawmakers must act quickly after the holiday break and navigate the entire process before the 2026 midterm elections. They’ll need to contend with the possibility of another government shutdown, the complexity of the bill having two parts from different committees, and the entrenchment of various sides, according to multiple sources monitoring the situation.
Breaking it down
The Senate Banking Committee aimed to hold some form of hearing — if not an actual markup — by the end of last week, but this past Monday, Chairman Tim Scott’s office released a statement confirming this wouldn’t occur, expressing anticipation for further collaboration in 2026.
“From the outset, Chairman Scott has emphasized that this effort should be bipartisan,” a committee spokesperson stated. “He has consistently engaged in good-faith discussions to produce a strong bipartisan product that provides clarity for the digital asset industry and positions America as the crypto capital of the world. The Committee continues to negotiate and looks forward to a markup in early 2026.”
Several key sticking points exist, as detailed to CoinDesk by four individuals monitoring the process: how decentralized finance (DeFi) might be defined and regulated; the treatment of stablecoin yield; whether major regulatory agencies like the Securities and Exchange Commission or Commodity Futures Trading Commission will be staffed with bipartisan commissioners; and whether lawmakers can bind President Donald Trump to any ethics agreement. These issues are not merely political for lawmakers; some, like DeFi regulation, have technical implications for the broader crypto industry, and poor definitions of “decentralization” could be challenging to amend in the future laws.
These issues are not new. As CoinDesk has reported, these points have been central to negotiations for months, although lawmakers sought to reach a point where they could conduct a crucial markup hearing before Congress adjourned for the holidays. A markup is a formal hearing in which lawmakers can propose amendments to modify legislation before voting on whether to advance it to the rest of the chamber for a broader vote.
That option being off the table may end up being a blessing in disguise, according to two individuals. A markup would expose the bill text to attacks from opponents in the upcoming weeks or lead to a more partisan bill that could falter in the Senate.
“It’s better that there was no markup, because given the shutdown and other factors, the timelines just didn’t align for a bipartisan compromise,” one individual said. “Had a markup occurred this year, it would likely have followed party lines, severely jeopardizing the bill’s chances of garnering enough support on the floor.”
There’s evident interest in bipartisan collaboration on this legislation. The House has already pushed through its own market structure bill with overwhelming bipartisan support, yet the Senate largely overlooked that bill’s existence and spent the last five months crafting its own version — albeit with notable influences from the House’s Digital Asset Market Clarity Act.
Decentralized finance
While the crypto sector advocates for very limited DeFi regulations within the bill, two individuals assert this is an unrealistic expectation. Senators like Mark Warner, the lead Democrat on the Senate’s Intelligence Committee, harbor national security concerns that necessitate some form of DeFi regulations before they cast their votes. Specifically, Warner wants to ensure robust measures against money laundering are addressed.
“There are genuine questions about what the federal government can accomplish in blacklisting protocols and wallets, and how to establish a regulatory perimeter around DeFi,” one individual explained. “We’re weighing both what we wish to accomplish and what is feasible. If nothing is instituted, Democratic support will certainly wane.”
Fears regarding regulatory arbitrage from traditional finance firms persist, though one individual noted these concerns may be driven less by consumer protection and more by an anticompetitive stance (as in, these businesses may not want to compete with DeFi). Still, traditional firms are lobbying for their perspectives to be reflected in the legislation.
Another individual suggested that DeFi concerns could potentially derail the bill’s progress. Though certain Democrats may want to support a crypto bill, their more progressive peers might resist this and apply pressure on moderates. Conversely, strict regulations on DeFi may alienate industry backing.
“People will be displeased with any compromise because one side opposes DeFi outright, while the other seeks total deregulation,” this person commented. “The middle ground will likely involve some regulation of what we define as DeFi. To reach an agreement, everyone must be a bit disappointed.”
The President’s role
Trump remains an unpredictable factor in these discussions. When asked during a White House event whether he would consider appointing Democrats to regulatory agencies like the SEC and CFTC, which traditionally include bipartisan commissioners, he suggested the possibility was slim.
“Do you think they would appoint Republicans if it were up to them?” Trump remarked. “We’ll evaluate it. We aim to be fair, but usually, they’re not putting forward Republicans.”
Democratic presidents have a history of appointing Republicans to the SEC and CFTC — for instance, Commissioner Hester Peirce was nominated by former President Barack Obama.
“There are specific areas we examine, and there are certain areas where we share power, and I’m receptive to that,” Trump added.
The broader concern may revolve around Democrats’ ethical reservations. They have persistently pushed for safeguards concerning Trump’s family connections to crypto. While the White House asserts no conflicts of interest exist, Sen. Cynthia Lummis mentioned negotiating with the White House on behalf of Democrats to secure an ethics provision.
“The White House responded that we could improve our proposal, so it was deemed unacceptable,” she stated during a recent appearance.
A compromise is essential. While some Democrats are keen to support this bill, they must demonstrate to voters that they can impose some limitations on Trump and his family’s business interests, or face challenges from their left flank, according to two individuals. This concern is especially pressing ahead of elections and as candidates for the 2028 presidential race prepare to announce their intentions.
One individual suggested that if Congress can resolve the remaining issues, they might persuade the White House to endorse some form of ethics provision, framing it as a chance to achieve progress on the bill rather than let it slip away.
Timeline constraints
Two individuals indicated that a markup will occur next month for at least one of the drafts. However, the bill’s pathway to the Senate floor remains unclear. Both the Banking Committee and Agriculture Committee must finalize their respective bills and reconcile any differences. Subsequently, the Senate can vote on the overall bill, which would then go to the House, likely leading to approval, and finally to the White House for Trump’s signature.
If the bill does not see any markup by the end of January, “the chances for further progress diminish significantly,” one individual warned. Another was hesitant to provide a definitive timeline for the markups but noted that the bill needs to pass through the Senate by April, or its likelihood of becoming law in 2026 would be very slim.
Adding to the complexity, Congress will be preoccupied with government funding as it reconvenes after the holidays; the continuing resolution that ended the previous shutdown expires on January 30. If lawmakers fail to agree on a new resolution or budget, another government shutdown looms, further delaying any movement on market structure legislation.
As CoinDesk’s Jesse Hamilton observes, the deeper Congress advances into 2026 and closer to election time, lawmakers may opt to postpone any legislation until after the results of next November’s elections are determined. A Democratic majority in the House of Representatives would necessitate alignment with their priorities.
The bill remains very much alive. A January markup might well take place — White House Crypto and AI Czar David Sacks hinted in a tweet late Thursday that Senators Scott and John Boozman “confirmed that a markup for Clarity is coming in January,” although a date hasn’t been confirmed yet — followed by a Senate floor vote soon after, especially if both committees mark up concurrently.
This week
If you have thoughts or questions about topics for next week’s discussion or any feedback you’d like to share, feel free to email me at [email protected] or connect with me on Bluesky @nikhileshde.bsky.social.
Join the group conversation on Telegram.
See you next week!
