One of the notable developments regarding cryptocurrency regulations in the US took place in the Senate this week. The US Senate passed a regulation aimed at temporarily banning the creation of central bank digital currencies (CBDCs). This amendment was added to the housing-focused bill called the "21st Century Road to Housing Act" and passed the Senate. In the vote held on March 12, the amendment containing the CBDC ban was approved with strong bipartisan support, with a vote of 89 to 10. This result represents the most advanced stage of anti-CBDC initiatives in the US Congress to date. However, for the bill to become law, it also needs to pass the House of Representatives, and this stage of the process seems more uncertain.
CBDC debates are high on the political agenda in the US
If the regulation passed by the Senate comes into effect, the US Federal Reserve (Fed) will be prohibited from directly issuing a CBDC or similar digital dollar until 2030. Initially, some senators advocated for a stricter approach, demanding a permanent ban. However, Senator Ted Cruz's proposal to completely and indefinitely ban CBDC did not receive sufficient support.
Therefore, the current regulation is a temporary ban and is designed to be valid until 2030.
The main concern of CBDC opponents is that a digital currency issued by the state could allow for the direct tracking of individuals' financial transactions. Critics argue that such a system could give the government unprecedented visibility and potential control over citizens' spending.
On the other hand, some economic circles and policymakers who support CBDC research state that the Fed is not close to issuing such a currency in the short term. According to this group, completely blocking CBDC research could eliminate options that may be needed in the future to maintain the dollar's position as a global reserve currency.
House of Representatives process uncertain
Although the bill has passed the Senate, the process in the House of Representatives is expected to be more complicated. The most important reason for this is that the CBDC ban is not a direct regulation of cryptocurrencies, but is included in a broad package of legislation aimed at housing policies. It is stated that some members of the House of Representatives may oppose crypto provisions that are not directly related to housing regulations. In addition, the ongoing separate discussions in the House regarding digital asset regulations may make it even more difficult for the CBDC issue to proceed through this legislative package. Therefore, it is not yet clear whether the House leadership will put the bill to a vote and with what amendments it will be brought to the agenda.
SEC adopts a narrower approach for tokenized securities
Another important development regarding crypto regulations in the US came from the US Securities and Exchange Commission (SEC). According to the statements of Commissioner Hester Peirce, the institution has backed down from the broad innovation exemption plan previously considered for tokenized securities.
The SEC had previously discussed offering a broad exemption by considering tokenized securities as a "testing ground". However, due to the reactions, the institution is now working on a narrower approach.
Under the new plan, SEC staff are working on a narrower innovation exemption that would allow certain tokenized securities to be traded on a limited scale. This approach represents significantly more limited regulation compared to the broad exemption discussed previously. Criticism has been primarily from traditional financial institutions. Large market players, particularly Citadel Securities, have argued that DeFi platforms should be subject to all regulatory obligations like traditional brokerage firms when trading tokenized securities.
Expectations for the CLARITY Act are declining
Another important regulation for the crypto market in the US, the CLARITY Act, has seen expectations decline in recent days.
According to Polymarket data, the probability of this market structure regulation being enacted this year has fallen from 78% to 56%. This 22% drop in just two weeks indicates that political tensions in Washington are complicating the crypto regulatory process. Disagreements between the White House and the banking sector regarding stablecoin yields are cited as a major factor in this decline in expectations. Furthermore, Senate Majority Leader John Thune's statement that the bill might not move forward before April also weakened market expectations.
