JUANA SUMMERS, HOST:
The crypto sector just experienced the equivalent of getting crushed in a playoff game. A bill the industry spent tens of millions of dollars promoting suffered a major defeat in the Senate. This was the latest setback in what has been a difficult year for the crypto sector. NPR senior business editor Rafael Nam is here to help us understand. Hey there.
RAFAEL NAM, BYLINE: Hey, Juana.
SUMMERS: Rafael, tell us about this bill and what makes it so important.
NAM: So the bill is known as the Clarity Act, and the crypto sector has been wanting to pass it since last year. And its goal was to create rules to regulate the industry. And I realize that may sound kind of boring, Juana, but think about it. Had it passed, rules covering just about every aspect of crypto would have been officially part of American law for the first time and reshaped the financial system, making crypto as legitimate as stocks and bonds.
SUMMERS: Wait a minute. Wait a minute. So the crypto sector wanted more regulations?
NAM: I know, yeah, and that may sound surprising. When you talk to people in the crypto sector, they always say, oh, we want regulations. We want clear rules of the road. But critics say the crypto sector really just wants their own regulations that go easy on the industry and wanted this Republican Congress to essentially lock favorable rules in. Here's Mark Hays from Americans for Financial Reform.
MARK HAYS: There's this industry narrative that says this bill was the result of years of work, but I think a lot of that work was done behind closed doors with mostly just friends of the industry.
NAM: Now, the crypto industry and Republicans insist this has been a transparent process, but in the end, the vote failed.
SUMMERS: Is that the only reason it failed?
NAM: No, there was also a lot of opposition from banks and small community banks especially, but the biggest source of friction was President Trump. He has been a big backer of the crypto industry and has been strongly pushing for this bill. The problem here, though was a dispute over an ethics clause in the bill that was intended to prevent conflicts of interest by federally elected officials.
Now, remember, this summer, the president disclosed he and his family had made $1.4 billion from investments in crypto ventures. And that was a number that many Democrats just cannot stomach. And many believed this clause just wasn't strong enough to prevent Trump and White House officials from directly benefiting from the industry. Here's Alex Thornton from the Center for American Progress, a Democratic think tank, and - on why the bill didn't go far enough.
ALEX THORNTON: It basically would have codified, it would have sealed into law loopholes for crypto and the ability of the administration officials who are - have been involved with crypto to continue profiting off of their crypto investments.
NAM: Now, Republicans and the White House have defended the ethics clause. Senator Cynthia Lummis from Wyoming said in a statement this week that President Trump agreed to, quote, "unprecedented ethics restrictions" and said the bill had, quote, "some of the toughest ethics restrictions in U.S. history."
SUMMERS: So, Rafael, what comes next for crypto?
NAM: So the crypto sector has vowed to try again, and - but the calendar doesn't work in their favor. It's looking very unlikely this bill will pass this year with the midterm elections just around the corner. And who knows, Juana, who will be controlling Congress next year? So, you know, this hasn't been a great year for cryptocurrencies either, with the markets tumbling for most of the year. Bitcoin, for example, is down more than 10%. So this setback at the Senate is another bitter pill for an industry that thought this year was - will be a game changer, but instead it's facing one of the biggest setbacks ever.
SUMMERS: NPR senior business editor Rafael Nam, thanks so much.
NAM: Thank you, Juana. Transcript provided by NPR, Copyright NPR.
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