Progress on the U.S. crypto market structure bill has slowed after Senate Democrats introduced a counterproposal challenging several key provisions. Their demands, which include removing yield payments on stablecoins and tightening rules around token classification, are expected to push back the bill’s markup that was initially targeted for this month.
Senate Democrats Push Back on Stablecoin Yield Provisions
Journalist Eleanor Terrett shared the Democratic counteroffer, which responds to the Republicans’ December 4 proposal. While Democrats say they agreed to “significant sections” of the RFIA framework, they emphasized major concerns regarding stablecoin yield restrictions outlined in the GENIUS Act, as well as issues involving token classification, illicit finance, and ethics.
Democrats argue that allowing interest or rewards on stablecoin balances could spark bank-run behavior, encouraging customers to pull deposits and take on excessive risk. They believe this poses a systemic threat if the stablecoin loses value.
They also referred to earlier bipartisan discussions around the GENIUS Act, which prohibits issuers from offering yield. Democrats insist the new bill must address yield-related loopholes for intermediaries and affiliated entities to protect the banking system while still allowing certain forms of user incentives.
This development comes shortly after Variant Fund’s Jake Chervinsky warned that disputes over DeFi regulations, yield, and ethics issues make it unlikely the bill will be finalized this year. Senate Banking Committee Chairman Tim Scott had previously expressed hope for a December markup, but negotiations now appear to be slipping into 2026.
Concerns Over Token Classification, Illicit Finance, and Ethics Rules
Senate Democrats also raised significant concerns around token classification. They argue that stricter safeguards are necessary to prevent potential risks spilling into traditional markets. Their proposal includes mandatory and timely SEC reviews to determine the regulatory status of digital assets.
They additionally support continued disclosure requirements for crypto projects that still rely on ongoing managerial or entrepreneurial efforts.
On illicit finance, Democrats want the legislation to ensure authorities can effectively isolate digital asset platforms used by North Korean actors and other bad-faith participants from the U.S. financial system.
Ethics provisions were also highlighted. Democrats argue that public officials should not be allowed to profit from crypto activities while in office. They propose restrictions preventing elected officials and their families from issuing, promoting, or benefiting financially from digital asset projects.
These concerns come amid their demands for an investigation into Trump-aligned World Liberty Financial, as well as repeated accusations that the U.S. president has conflicts of interest linked to crypto ventures.
Lastly, Democrats called for stronger bipartisan representation at both the SEC and CFTC, pushing for more Democratic commissioners to ensure balanced oversight of digital asset markets.
