$BTC $ETH $BNB #TrumpVsMusk #MarketPullback #CircleIPO #CUDISBinanceTGE #TrumpTariffs Democratic senators on the House Financial Services Committee held a separate hearing on Friday to discuss the pending crypto market structure bill, where witnesses expressed concerns about the widespread potential impacts of this law on the U.S. stock market.

Main points of contention

  1. Exemption from the SEC:

    • The CLARITY Act will create the first legal framework for the issuance and trading of crypto assets, while largely exempting most crypto from SEC oversight.

    • Amanda Fischer (Policy Director at Better Markets) warned: "These regulatory loopholes will not be limited to crypto," and could allow traditional financial institutions to exploit blockchain to evade regulation.

  2. Two-tier classification system:

    • Most tokens will automatically be classified as "digital commodities," exempt from SEC control.

    • Issuers wishing to operate like traditional securities can register as a "mature blockchain system" with the SEC - a process that takes years.

    • Fischer believes few will choose this path when the bill has provided too many legal loopholes.

  3. The gray area of DeFi:

    • The bill excludes DeFi activities from the new regulatory framework as requested by the crypto industry and Republicans.

    • Representative Sam Liccardo (Democrat-California) expressed concern: "DeFi is growing rapidly and will soon account for the majority of transactions. I fear that ignoring this sector is like concentrating the fleet in Lake Superior while neglecting the ocean."

Partisan conflict

  • Democratic leaders like Ms. Maxine Waters focused their criticism on the fact that the bill does not prevent former President Trump from participating in crypto projects while in office.

  • Republicans countered that this is merely a "partisan exercise" that does not focus on the substance of the bill.

Potential impact:

  • If passed, the CLARITY Act could set a dangerous precedent by undermining investor protection rules that have existed since the 1930s.

  • For example, Robinhood has stated that crypto trading is cheaper by "one order of magnitude" compared to traditional stock brokerage due to not having to pay for SIPC insurance or SEC oversight.