U.S. encryption regulatory bill encounters obstacles, divisions emerge within the Republican Party

The "Crypto Week", which has received much attention from the cryptocurrency industry, unexpectedly encountered setbacks in Washington. Originally seen as an important moment for the industry to achieve breakthroughs at the policy level, it yielded surprising results during the procedural vote on Tuesday.

The voting results showed 196 votes in favor and 223 votes against. It is worth noting that 13 Republican representatives stood on the same side as the Democrats, jointly blocking the procedural motion to debate and advance this proposed bill. This means that unless the House of Representatives passes the relevant rules of procedure again, these bills, which carry the hopes of the industry, will not be able to enter the substantive debate stage.

Before the voting, the sentiment in Washington's encryption industry was high, with widespread expectations that these bills would pass smoothly. Even some politicians were waving flags for "Crypto Week" on social media, portraying it as a key step for the United States to become the "undisputed, number one leader" in the digital asset field. He called on all Republican representatives to vote in favor, firmly believing that the "GENIUS Act will make our great country lead China, Europe, and all other countries by light-years, as they are endlessly trying to catch up, but just can't."

The blocked cryptocurrency legislation "package" includes three bills that are crucial to the industry:

1. The GENIUS Act: This bill regarding the regulation of stablecoins received some Democratic support and was successfully passed in the Senate last month. It aims to provide a clear regulatory framework for stablecoins and is seen as key to unlocking broader institutional adoption.

2. CLARITY Act: This act aims to clarify the classification rules for digital assets, specifying which assets should be regulated as securities by the U.S. Securities and Exchange Commission (SEC) and which should be regulated as commodities by the Commodity Futures Trading Commission (CFTC), in order to end the "regulatory gray area" that has long troubled the industry.

3. Bill to Prevent Central Bank Digital Currency (CBDC): This proposal aims to prohibit the Federal Reserve from creating a central bank digital currency, reflecting some lawmakers' concerns about government control over digital currency.

These bills are seen as the cornerstone of the United States establishing a comprehensive and predictable regulatory framework in the digital asset space, which could bring much-needed certainty to the market and attract more capital and innovation.

In this vote, the most striking aspect is the "defection" of 13 Republican representatives. Reports indicate that several Republican representatives, including Marjorie Taylor Greene, Chip Roy, Michael Cloud, and Anna Paulina Luna, cast votes against.

Marjorie Taylor Greene from Georgia publicly explained her position on social media. She stated that the GENIUS Act fails to include a ban on central bank digital currencies (CBDC), and Speaker Johnson did not allow related amendments to be submitted. Greene emphasized that Congress must also include a CBDC ban in the GENIUS Act, as she believes "Americans do not need a government-controlled central bank digital currency."

House Speaker Johnson is thus caught in a dilemma. After the failed vote, he stated that Republicans "are still in dialogue, answering questions," trying to soothe and garner support from these conservatives. However, he also admitted that bundling all three bills into one "big package" is not feasible, with a senior Republican lawmaker bluntly stating: "Packaging votes will only cause these bills to fail in the Senate." This statement reflects the strategic predicament faced by Republican leadership in balancing the demands of different factions within the party and ensuring legislative viability.

After the news of the voting failure came out, stocks related to encryption fell sharply: the stock price of a stablecoin issuer dropped by more than 7%, a cryptocurrency exchange fell by over 4%, and a digital asset company's stock price also dropped by 2%.

House Speaker Johnson has announced plans to restart procedural voting on the encryption bill on Wednesday local time. The Louisiana Republican told reporters as he left the Capitol that there is still "ongoing communication within the party to address members' concerns" and emphasized that "these encryption bills are a shared priority for the White House, Senate, and House of Representatives." According to reports, a certain political figure expressed being very "angry" about the voting outcome and is communicating with relevant lawmakers.

Nonetheless, some industry analysts remain optimistic about the future of the bill. TD Cowen policy analyst Jaret Seiberg noted in a report to clients: "It is likely that we will vote on the rules again in the House tomorrow (Wednesday). If it doesn't happen tomorrow, it may be postponed until next week." Seiberg further stated that he still expects the House to pass the GENIUS Act.

Cody Carbone, the CEO of Digital Chamber, is also confident about the final passage of the bill. He pointed out on social media that the best way to address the prohibition of CBDCs is through the GENIUS Act: "If lawmakers are interested in banning CBDCs and competing with digital currencies issued by other countries, then the way to do this is through the GENIUS Act, allowing the private stablecoin market to thrive in the United States."

This setback confirms a reality: in Washington, even agendas strongly promoted by the upper echelons may be defeated by the subtle power balance within the party. When technological innovation meets political maneuvering, the "compliance path" for encryption will inevitably be bumpy.