US Senate blocks Trump-backed crypto bill, triggering broad market selloff

The US Senate on Tuesday blocked a major Trump-backed cryptocurrency bill from moving forward, triggering a sharp selloff across digital assets and crypto-related stocks.

A procedural vote to advance the CLARITY Act, formally known as H.R. 3633, failed 49-50, falling short of the 60 votes required to bypass a Senate blockade. Four Republicans — Susan Collins, Jerry Moran, Josh Hawley, and Thom Tillis — joined Democrats in opposing the measure. Tillis switched his vote to "no" at the last minute in a standard tactical move that allows the bill to be brought back for reconsideration.

Democratic opposition focused heavily on the bill's ethics rules. Senators Elizabeth Warren and Mark Warner argued that the draft's language was vague and failed to adequately cover potential conflicts of interest, particularly regarding President Donald Trump and his family's private cryptocurrency ventures. Trump had actively championed the bill after styling himself as a "crypto president" during his election campaign.

The legislative setback hit the markets immediately. Bitcoin, which had been trading near $79,000, fell sharply to around $75,000. The drop represented its steepest single-day percentage decline since June. Other major tokens followed, with Ethereum down 3.5 per cent and XRP plunging more than 10 per cent.

The sudden drop triggered a wave of forced liquidations for highly leveraged traders. More than $290 million in crypto positions were wiped out in a single hour, pushing total 24-hour liquidations past $760 million.

Publicly traded crypto firms suffered heavy losses as well. Shares in stablecoin issuer Circle and the exchange Coinbase tumbled by as much as 10 per cent. Software firm MicroStrategy, which holds large reserves of Bitcoin, fell 4.6 per cent, while retail trading platform Robinhood slipped 3 per cent.

The CLARITY Act aimed to establish a comprehensive federal framework for digital assets, clarifying which tokens fall under the SEC and which are overseen by the Commodity Futures Trading Commission. Industry advocates had lobbied intensely for the bill, arguing that statutory clarity is essential to draw in long-term institutional investment.

With Congress scheduled to leave Washington this month ahead of the November midterm elections, the defeat effectively shelves the legislation for the rest of this congressional term. Crypto firms will have to continue navigating a patchwork of state rules and federal enforcement actions.

The market downturn was compounded by broader economic pressures. The yield on the US 10-year Treasury note climbed above 5 per cent on Tuesday, its highest level since 2007, amid rising energy prices and persistent inflation concerns. Brent crude oil rose past $108 a barrel, and investors are bracing for the Federal Reserve's upcoming interest rate decision on Wednesday, where a rate hike could further pressure risk assets.