Two influential U.S. senators have introduced sweeping amendments aimed at restricting the use of cryptocurrencies for government obligations and cutting off crypto firms from critical Federal Reserve services. The proposals, spearheaded by Senators Jack Reed (D-RI) and Elizabeth Warren (D-MA), mark a significant legislative push to tighten oversight of the digital asset industry.
Reed targets crypto tax payments
Senator Reed submitted an amendment that would explicitly prohibit federal and state agencies from accepting cryptocurrency for tax payments, fees, or other government-imposed charges. The measure would remove a practical use case for digital assets as a functional medium of exchange, potentially reducing demand and adoption. The proposal was first reported by Eleanor Terrett, host of Crypto in America.
Warren’s broader assault on crypto integration
Senator Warren, a longtime industry critic, has filed over 40 crypto-related amendments. The most prominent would bar the Federal Reserve from issuing master accounts to crypto firms. A master account grants direct access to the Fed’s payment and settlement systems; denying it would force crypto companies to rely on intermediary banks, raising costs and introducing counterparty risk. Her package also addresses anti-money laundering compliance, consumer protections, and stablecoin oversight.
Warren slams the CLARITY Act
In parallel, Warren strongly denounced the newly unveiled CLARITY Act, a crypto market structure bill drafted by Republican leadership on the Senate Banking Committee. She called the legislation a “risk to investors, national security, and the entire financial system,” accusing it of lacking ethics guardrails and enabling conflicts of interest. White House crypto official Patrick Witt responded sarcastically to Warren’s immediate rejection, mockingly praising her for supposedly reading the 300-page bill overnight.
Division and amendments in the Senate
While Warren maintains a hard line, Senate Majority Leader Chuck Schumer indicated Democrats are open to a good crypto bill, though current proposals are “not there yet.” Separately, Senators Reed and Tina Smith filed an amendment that would force a choice between the crypto industry and traditional banks by restricting stablecoin yield provisions—a move expected to create a tough vote for Republicans friendly to both sectors.
Industry reaction and path forward
Despite the friction, some industry proponents remain hopeful. Chris Dixon of a16z crypto stated that the CLARITY Act has improved significantly and reflects years of bipartisan work, urging Congress to pass it. The legislative battle underscores the high-stakes struggle over digital finance regulation, with lasting implications for how cryptocurrencies operate in the United States.
