Crypto Regulation Hits a DeFi Wall

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Monday, December 8. And today, we are doing a crypto regulatory update. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you wanna dive deeper into the conversation, come join us on the breakers discord. You can find a link in the show notes or go to bit.ly/breakdownpod. Alright, friends. Well, the market structure bill might have to wait until next year as the policy questions get complicated. Coming out of the government shutdown, GOP leaders set a bold goal of getting the market structure bill finalized and into a markup session by the end of the year. There were strong signs of progress in the following weeks as Democrat leaders were invited to bipartisan negotiation sessions in an attempt to reach an accord on final language. However, with just a couple of weeks left in Washington, it now looks like the market structure bill is going to get punted into next year. Variant Fund chief legal officer Jake Chervinsky wrote on Thursday night, the senate is working very hard to get this done, but the closer they get the more complex it becomes. I'm not betting on a markup this month. Three issues are holding up the bill: stablecoin yield, conflicts of interest, and defi. He explained that neither party wants to push the bill to a markup hearing unless they're certain they have the votes. During a markup, lawmakers read through and vote on possible amendments, finalizing the language before the bill is put to a floor vote. According to Chervinsky, at this stage, the disputes are still widespread among parties, so more negotiation is required. Chervinsky explained the nature of the three contentious areas. Prohibition of stablecoin yield has been the big ask from the banking lobby throughout the year. They got a prohibition into the Genius Act, but stablecoin issuers immediately found a loophole and started offering rewards through third parties. Lawmakers were told this issue would be reopened in the market structure bill specifically, so they would waive through the Genius Act over the summer. Regarding the current status quo, Chervinsky wrote, banks hate this. They call this obvious plain reading of the text a loophole and want it expanded in market structure. Set aside the silliness of the banks asking to amend a law that they just supported and to put stablecoin content in a bill about market structure. Nonetheless, the banks were influential, and they might be able to get a few senators to agree. That could be enough to kill the bill. Regarding conflicts of interest, democrat lawmakers have consistently called for language to restrict the president's crypto dealings. The issue was punted from the Genius Act, but has only grown in importance since …