The United States Senate is moving closer to a mid-May markup for a comprehensive crypto market structure bill, even as unresolved disputes over ethics, stablecoin rewards, and decentralized finance threaten its passage. Simultaneously, the White House has unveiled a budget proposal that targets crypto tax loopholes and mining operations, adding another layer of regulatory pressure.
Market Structure Bill Gains Momentum
Senator Thom Tillis (R-N.C.), a key negotiator, has requested Senate Banking Committee Chair Tim Scott to schedule a hearing to amend and vote on the legislation. Tillis hopes to release fresh legislative text days before the markup, which a crypto industry source told The Block could occur in mid-May.
However, Tillis has drawn a red line on ethics, telling Politico he would oppose the bill if it lacks ethics language addressing conflicts of interest, particularly those involving President Donald Trump’s crypto ventures. Bloomberg estimates Trump has earned at least $1.4 billion from his crypto projects, including World Liberty Financial and a 20% stake in mining firm American Bitcoin. Senator Elizabeth Warren recently criticized Federal Reserve Chair pick Kevin Warsh as a possible “sock puppet” for Trump, citing his crypto holdings.
The bill aims to regulate the crypto industry by designating jurisdiction between the Commodity Futures Trading Commission and the Securities and Exchange Commission. A similar version, the Clarity Act, passed the House last year. However, the Senate version remains stalled over stablecoin rewards, DeFi language, and ethics provisions. Senator Angela Alsobrooks (D-Md.) stated that resolving illicit finance and ethics issues is necessary for a bipartisan vote. Chair Scott believes ethics provisions do not belong in his committee but acknowledged the need for their inclusion before a full Senate vote.
Senator John Kennedy (R-La.) has withheld support due to frustrations with the House and White House over a stalled housing bill, complicating the path to the 60 votes needed for passage. Industry insiders estimate the bill’s chances at 15–25%, while Galaxy Research places it at 50%. The House version of Clarity includes a prohibition on federal officials or family members issuing digital commodities, a red line for the White House.
White House Tax Proposal Targets Crypto Loopholes
Meanwhile, the White House budget proposal introduces measures to close the crypto wash sale loophole, aligning digital asset tax treatment with stocks and securities. Under current law, crypto is classified as property, allowing traders to sell at a loss and immediately repurchase without restrictions. The new rule would block loss claims if traders rebuy the same crypto within 30 days.
The proposal also includes a 30% excise tax on electricity used for crypto mining, dubbed the Digital Asset Mining Energy (DAME) tax, citing environmental concerns. A phased approach would apply to high-energy consumers. Additionally, the proposal mandates reporting of foreign crypto holdings above $50,000 under the Foreign Account Tax Compliance Act (FATCA), expanding transparency requirements.
Parallel Tracks and Uncertain Future
Lawmakers are advancing both the Clarity Act and the tax proposal on separate tracks. The tax language mirrors past Obama-era and Biden-era budgets that failed to pass. The Securities and Exchange Commission is also reviewing ETF filings tied to Bitcoin and XRP. The combined measures aim to increase federal oversight, but the bill’s fate hinges on resolving ethics disputes, stablecoin rewards, and DeFi concerns before the legislative window closes.
