The coded market structure bill is about to be considered tomorrow night

By Chloe, Challenger

 

On January 15, the United States Senate Banking Commission will vote critically on the Digital Asset Market Structures Act. Although the Agriculture Commission will defer consideration to the end of January because of DeFi-related definitions and cross-party consensus, it is undeniable that this is the most important piece of legislation for encryption regulation since GENUS Act。

This paper will provide an in-depth analysis of the core controversy of the current bill: from the “deposit defense war” in the banking sector to stabilize high-value gains, to whether DeFi developers should be held criminally liable for “codes” and then to the Tromp family's “moral clause” politics. It can be said that this is not only a legislative vote, but also a positive match between traditional financial forces and decentrization mechanisms, the results of which may determine the direction of the global encryption market over the next decade。

REGULATORY CHART RECASTING: THE COMPETITION BETWEEN THE SEC AND THE JURISDICTION OF THE CTC

15 January, at 10 a.m., the United States Senate Banking Commission will hold scheduled CLARITY Act deliberations. Although the market would have expected the two commissions (banks and agriculture) to move forward in tandem, the situation is clearly more complex。

Two Committees: "One step in the way"?

Senate Banking Commission (Senete Banking Commission): led by Tim Scott, the core task is to define the legal framework for digital assets under the Securities Act. The bill is expected to put an end to the SEC's view of token currency as the regulatory status of securities indefinitely on the basis of “investment expectations” alone, and instead to establish a clear exit mechanism and legal procedures for “from securities to commodities”. The Commission will proceed as scheduled, with the aim of establishing clear boundaries for the competence of the SEC。

Senate Committee on Agriculture (Senete Agriculture Committee): led by John Boozman, led the division of jurisdiction between the revision of the Commodity Law and the CFTC. Because of the current differences between the two parties over the core details of the DeFi technical definition and interest earnings on stable currencyDecides to defer consideration until the end of JanuaryI don't know. The aim was to secure more time to reach cross-party consensus, to ensure that key Democrats would be targeted during the final vote and to avoid the deadlock in the Senate over the bipolarity of the bill。

THE SEC'S ATTITUDE HAS SHIFTED TOWARDS SEEKING TO PULL THE ENCRYPTION MARKET OUT OF THE REGULATORY GREY ZONE

SEC Chairman Paul Atkins on 13 JanuaryX, IT SAYSThis week has been a milestone for the encrypted monetary industry and has publicly supported Congress’s clear delineation of the SEC’s and CFTC’s jurisdictional boundaries, clearly distinct from the “law-enforcement-type regulation” of the ills of the former president, Atkins supported the promotion of a legislative framework aimed at bringing the encryption market out of the regulatory grey zone。

At the same time, he noted that greater market certainty was highly consistent with Trump's vision of a “world capital of encrypted currency”. Atkins is optimistic that the bill was approved and signed in the course of the year, and expects that it will contribute significantly to the long-term development of the encryption market while enhancing investor protection。

 

The deposit defence: should the “proceeds” of a stable currency be prohibited altogether

One of the current points of contention stems from the patchwork amendments to the GENIUS Act. Although the Act expressly prohibits interest payments by the issuer of the stabilization currency (Issuer), it does not impose restrictions on the “distributor”, which in turn creates strong dissatisfaction with traditional financial institutions。

In Coinbase, for example, the platform currently provides about 3.5% incentives to users holding USDC. Since Coinbase ' s role is that of distributor rather than distributor (Circle), it is legal under the current GENIUS Act. I don't knowTHE AMERICAN BANKERS ASSOCIATION (ABA) IS LOBBYING STRONGLYLegislators are required to extend the interest ban to associated companies and partners that stabilize the issuer。

Banking's three core concerns

1. Loss of deposits:THE BANKING SECTOR IS CONCERNED THAT STABILIZING THE RATE OF RETURN ON CURRENCY CONTINUES TO BE HIGHER THAN TRADITIONAL SAVINGS RATES, WHICH COULD TRIGGER LARGE-SCALE TRANSFERS. THE AMERICAN BANKERS ASSOCIATION (ABA) QUOTED DEPARTMENT OF THE TREASURY DATA INDICATING THAT WITHOUT A STRICT INTEREST BAN, US$ 6.6 TRILLION IN BANK DEPOSITS WOULD BE AT RISK OF OUTFLOWS。

Reduced lending capacity:The loss of deposits will directly affect the core business model of traditional banks, particularly the lending capacity of community banks. Banks use deposits to provide critical loans to local businesses, farmers, students and home buyers; if the pool shrinks due to stable currency competition, it will seriously disrupt local lending operations。

Unfair competition:STABILIZED CURRENCY IS OFTEN PACKAGED IN PRODUCTS WITH SIMILAR BANK DEPOSIT FUNCTIONS IN THE MARKET BUT LACKS SUBSTANTIVE INSURANCE COVERAGE BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). ABA CRITICIZES THE FACT THAT AN ENCRYPTED CURRENCY EXCHANGE DELIBERATELY DILUTES RISK DIFFERENTIALS THROUGH COVERT ADVERTISING, WHICH CONSTITUTES UNFAIR COMPETITION AND EXPOSES CONSUMERS TO FINANCIAL RISK。

Counterattack from the encryption industry

Coinbase Chief Policy Officer, Faryar Shirzad, charges against the banking industryFight backI don't know. He pointed out that United States banks earned more than $360 billion annually from payments and deposits, and that the banking industry was anxious to ban a currency stabilization incentive essentially to defend vested interests rather than prudential regulation。

Besides, Shirzad quoted itCHARLES RIVER CONSULTANTS (CRA)andIndependent study at Cornell UniversityIt is clear that there is no significant correlation between the growth of the stable currency and the outflow of bank deposits, and that it takes up to 6 per cent for incentives to have a real impact. And warns that China has announced interest payments for several renminbis at a time of internal debate in the United States; if the United States weakens the competitiveness of stable currencies as a result of bank lobbying, it would be tantamount to taking the lead in the global competition for several currencies and threatening the dollar’s hegemony。

On the other hand, Alexander Grieve, Vice-President of Government Paradigm, characterized banking claims as “false and alarming” political interference。He thinks..If the legislator is forced to modify the incentive provisions in the GENIUS Act, the imposition on distributors of a prohibition on the payment of the proceeds is in essence equivalent to imposing a “hidden holding tax” on the holders of the stable currency, forcing intermediaries to retain profits that would otherwise have belonged to consumers. Grieve warned that such technological innovation at the expense of traditional financial profits would seriously weaken the international attractiveness of the United States’ stable currency ecology, leading to its overall backwardness in the competition for the Web3 financial infrastructure。

 

DeFi Controversy: Is writing a code for “businessing money”

This was the highest technical threshold in the bill and the main reason for the postponement of the agricultural committee. The point at issue is: is the person who wrote the code responsible for the automatic execution of the code

The United States Department of Justice has prosecuted Mixer Developers under the Unlicensed Currency Transfer Act (e.g. Tornado Cash Consortium), the rationale of which is based on the assumption that the "code is the intermediary". In the view of regulators, the development and deployment of codes with financial processing functionality is essentially the creation of an automated “currency transfer operation”. In other words, developers must be responsible for the follow-up implementation of codes. This legal interpretation, which equates “software development” with “financial operations”, is seen by the Web3 industry as a fundamental threat to technological innovation。

It's not like you're in troubleDeFi Education FoundationIt was countered by core practitioners that this was an unworkable logical paradox in technical practice. Traditional financial institutions are able to assume compliance obligations provided that they have “substantive control” over transactions; however, once a true decentrization agreement is deployed, it has a non-mutilable and self-executing character, and the developers will be completely deprived of the ability to intercept transactions or freeze assets. To require a “developer” who cannot intervene in the operation of the software to assume the same compliance responsibilities as banks would be tantamount to requiring a car manufacturer to face criminal charges for speeding violations on every road。

If the bill adopts the current restrictive definition, the developer will be exposed to criminal risk because the smart contract he has issued is used by a third party for illegal purposes. This would not only destroy DeFi’s technological foundations, but would also trigger a massive wave of asylum-seekers in research and development that would ultimately marginalize the United States from global competition for the next generation of financial infrastructure。

Ethical provisions: The Trump family and conflict of interest

The issue of political ethics has become one of the key variables for the CLARITY Act’s ability to reach cross-party consensus。

THE WLF ENTITY FORMALLY APPLIED TO THE U.S. GENERAL MONETARY OFFICE (OCC) LAST WEEK FOR A NATIONAL TRUST BANK LICENSEI don't know. This led to a political storm, at the heart of which was the question of whether a supervisor appointed by the President himself had the authority to review applications from the commercial banks holding the presidential family shares. The Democratic leader Elizabeth Warren immediately issued a statement pointing directly to the conflict of interest:

“President Trump's encryption company has just applied for federal bank licences, which will be examined by a supervisor appointed by the President. We have never seen a financial conflict or corruption on such a scale. When the Senate considers the bill on market structure in the next few days, it is important to address this issue positively, namely, that it is the responsibility of bank regulators to ensure equitable stability in the economic system, rather than to profit from the private sector of their boss (President)

In response to the above-mentioned controversy, Democrat Senator Elizabeth Warren and others insisted on the inclusion of a “moral clause” in the CLARITY Act, which was intended to prohibit senior federal officials and their immediate family members from taking personal advantage of digital assets during their tenure. Although the Chamber of Deputies had previously opted to avoid the issue in order to obtain clearance during its deliberations, the Senate Democrats had made it clear that failure to include restrictions on conflicts of interest at the top of the Government would be discouraged in the final ballot. This has added to the vote on January 15 a layer of extra-technical politics。

This is the next decade of encryption

The vote in Clarity Act was essentially an attempt by the United States Government to integrate encrypted assets into the existing financial and political system, after confirming their strategic status. Whatever the end result, the “grey zone” between the encryption industry and traditional finance has gradually faded. This vote will have three profound implications:

First, regulatory certainty would trigger a large “compliance premium”. If CLARITY Act clarifies the boundaries of authority and responsibility between the SEC and the CFTC, it will put an end to the volatility of “law enforcement” regulation, and the entry of trillion-dollar institutional funds into the digital asset market will bring certainty. At that time, the encrypted currency will formally shift from marginal speculative assets to mainstream financial goods and instruments。

Secondly, it is a geopolitical competition on the focus of innovation. The limits on the return of stable currency and the definition of the responsibilities of DeFi developers are essentially testing the US ceiling on tolerance for technological innovation. If the bill eventually goes back to conservative banking protectionism or harsh codes, it is likely to trigger a brain drain in R & D; conversely, if innovative flexibility is preserved, the United States will have the potential to secure its “world-encrypted currency capital” and further consolidate the dollar’s hegemony in the digital age。

Finally, the vote marked the “deep integration” of Web3 with traditional power. From the interest in stabilizing the currency to bank deposits to the moral terms of the President ' s family, the encrypted currency is no longer the utopia of the techno-bots, but the centre of real power and capital games。