The Breakdown - Democrats Blow Up at Crypto Executives Over Market Structure Bill

Episode Date: October 24, 2025

A tense closed-door meeting between Senate Democrats and crypto executives erupted into frustration and accusations after the leak of a draft market structure proposal seen as a de facto DeFi ban. NLW breaks down what went wrong in the meeting, why trust between Democrats and the crypto industry is fraying, and how the stalled bill could slip past year-end. Plus, new GOP efforts to modernize financial crime reporting laws, the banking lobby’s fight against stablecoin interest, and Standard Chartered’s bearish short-term Bitcoin call. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, October 23rd, and today we are talking about a meeting between crypto executives and Democrats that went poorly. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it. Give it a rating, give it a review, and if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, well, crypto executives were in Washington to meet with Senate Democrats, and it seems the roundtable went exceptionally poorly.

The meeting was arranged by Senator Gillibrand to settle disagreements over the market structure bill. Democrats had circulated their own market structure framework to the industry last week, and that framework was leaked to the press and met with widespread industry criticism. Primarily, crypto folks voiced concern over an anti-money laundering provision that would apply to DeFi protocols and appear to function as a de facto ban. The pushback was so bad that senators on both side of the aisle, walked away from negotiations, leaving the bill in limbo.

Heading into Wednesday's meeting, there was a sense that executives would be able to explain why the Democrat proposal was a non-starter and suggest a more workable compromise. A source familiar with the meeting said the roundtable began with 30 minutes of introductions from industry figures, who offered nothing more than top-level discussions of what they wanted to see in the bill. Senator Ruben Gallego reportedly told the executives, I'm really effing pissed about what happened last week. Don't be an arm of the Republican Party.

They used you all and your megaphones to F us. Obviously, that has been censored for polite conversation. Now, a source commented that while trust had been broken, Democrats still want to get a bill done. They presented the view that Democrats aren't interested in slow walking the process. However, another Democrat senator said during the meeting, if something happened similar to what happened last week, it's going to set us back again. The bill requires around eight Democrat senators to join with Republicans to pass, so some level of agreement is required.

And while the president's crypto businesses are a prominent complaint for Democrats, the compliance issues seem to be the real sticking point. Of note, Senate Minority Leader Chuck Schumer was present at the meeting, Elizabeth Warren, who leads the banking committee that will mark up the bill was not. Crypto-lobbyist Kristen Smith, now president of the Salana Policy Institute, briefed the press following the meeting. She called it a necessary step at this time and reaffirmed the Democrats want to get a bill done. However, she added, my takeaway was that there's a group of Democratic senators who really do want to get this done, and they've been really held up on maybe process to date. The good news is that there is a lot of interest there in going deeper and working to get this right.

The process in question refers to a Democrat demand of participating in initial drafting of the bill rather than only having input via amendments during a markup hearing. Smith continued, overall, there was a little bit of frustration from some of the members about the way the process has played out in the past, but I think everyone left with a forward-looking mindset that they want to continue to exchange ideas, exchange information, and get the process of crafting legislation moving again. After reading reports of Senator Gallego's outrage at the leak, former White House crypto advisor Bo Hines tweeted,

So let me get this straight. A Democratic senator is upset the crypto community was able to review the policy proposals he wants to turn into law. How is this not satire? Finance lawyer Scott Johnson commented, Gallego sends a letter proposing legislation that is far worse than Gensler ever could have accomplished, attacking an industry that backed him in his Senate run. Is the industry supposed to take it lying down?

He's making it really difficult for Fair Shake and other groups to justify supporting questionable Democrats going forward. Complete flop. Republicans also met with the executives following the heated Democrat roundtable, a spokesperson for Banking Committee chair Tim Scott said the meeting was productive, commenting, banking committee Democrats must commit to a markup date so the digital asset industry can finally have the regulatory clarity it needs to compete, thrive, and innovate here in America, not just for the digital asset community, but for the American people who deserve greater

access, opportunity, and democratization in our financial system. From the meeting, Senator John Kennedy warned executives, the bankers are worked up, okay, and you better take them serious as four heart attacks and a stroke. The banking lobby has been pushing for a stricter ban on interest paid on stable coins, an issue that's up for amendments in the market structure bill. Commenting on the Republican meeting, Smith said, it was more of a relaxed conversation. Similar to the Democrats, I think the Republicans are really eager to do this.

Now, Republicans were looking to pass the bill prior to Thanksgiving, but that timeline is rapidly slipping away. There's widespread concerns that bumping the bill into next year will cause it to run up against campaign season for midterms and ultimately leave the bill. bill orphaned until after the election. Should Democrats win control of either chamber of Congress next November, then the contours of the negotiation change in the bill could require a fresh start, taking even more time. Smith isn't too worried about this eventuality, stating, if this does end up slipping, it's not the end of the world. We've got an SEC right now that

is doing a lot of work with Project Crypto and is going to answer some of these questions. Now, the meetings were intended to jumpstart the stalled talks to ensure the bill can move quickly once the shutdown ends. Judging from the reporting, it's difficult to know if that mission was accomplished, but in public at least everyone is saying all the right things. Senator Cynthia Lummis said it was a productive day and that she looks forward to, quote, working with all my colleagues to bring this critical digital asset legislation to the president's desk. Coinbase CEO Brian Armstrong said, the good news is that there's strong bipartisan support and will to get this legislation done. 90% of the issues are already agreed and there's draft

text going back and forth. The last 10% are the remaining issues and everyone committed to get in the room together to work it out. Hopefully we'll get it out of committee by Thanksgiving. Look, you guys know I don't editorialize too much, and while I empathize with a senator who is in the minority in their party and is trying to get things done in a productive way, my feeling about this can only be summed up in the famous Bart Simpson quote of, Eat My Shorts. When Democrats stop trying to stick in de facto bans for entire categories of this industry, maybe then it will start making sense for the industries to stop being loud about those de facto bans.

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crypto startups. In particular, reporting thresholds have never been updated, so every transaction above $10,000 requires a report. When the bill was passed, that threshold was the average annual household income. Now it's about half the price of the average used car. The bill proposed by legislators led by Banking Committee Chair Tim Scott would change those thresholds for the first time in over 50 years. Only transactions above 30,000 would trigger a mandatory report, while the threshold for suspicious transactions would be raised from 2,000 to 3,000, and 5,000 to 10,000 for the two different categories of severity. The bill will also require the Treasury Department to adjust these figures every five years to account for inflation. Senator Pete Ricketts,

who is sponsoring the bill, said that it, quote, cuts red tape for banks and credit unions, while ensuring law enforcement still has the tools they need to do their job. This, to me, seems so obviously clear, I have no doubt will find a way to reject it. Meanwhile, the lobbying battle over interest on stablecoins continues to rage, with the topic having a prominent position at the annual meeting of the American Bankers Association. The organization's senior VP of Innovation and Strategy, a contradiction in terms, if ever I've seen one, Brooke Gibara said at the conference, this is about ensuring banks continue to be in a position to support their communities and power the economy. A detriment to that would be allowing the likes of Coinbase of Cracken to pay

interest on payment stable coins. That just flies in the face one of the notion of a payment stable coin that it should be a means of payment and not a store of value, but two, this prohibition that Congress clearly set, that we've already talked about not paying interest on these things. Executive Director Jess Sharp elaborated on the banking lobby position, adding, this isn't just about what's good for banks, it's about what's good for communities. Banks take deposits and convert them into loans. That's what we do. Fewer deposits means fewer loans, and most members of Congress understand that's not a good thing. Cracking co-CEO Dave Ripley was not having it, tweeting in response, the panel hosted by the ABA said allowing companies like Cracken or Coinbase

to pay interest on stable coins would be a detriment. A detriment to who? Healthy competition is the bedrock of a free market and free markets benefit actual consumers and businesses. Consumers should have the freedom to choose where they hold value and the most efficient way to send that value. The reality is that regulatory moats do exist and they do work to enrich the companies that form them. So it's not surprising to see the ABA playing this game of moat building to line their pockets. Banks want to preserve their position and keep earning fees on client assets without passing the benefit back to the people who own them. We are building towards something else, a system where services once reserved for the wealthy are accessible to everyone. We will stay

pro-competition, pro-consumer, and pro-innovation. A last note today, keeping the pulse on how people are thinking about the cycle, Perennial Bulls standard chartered have flipped bearish on Bitcoin, at least in the short term. In a note published by the bank on Wednesday, analyst Jeffrey Kendrick said that he believes a slide to below 100K seems inevitable by the weekend. He wrote, The question now is how far does Bitcoin need to fall before finding a base? However, he believes the dip will be short-lived in that this may be the last time Bitcoin is ever below 100K. As with most analysts at the moment, Kendrick said he is monitoring gold of Bitcoin flows as a major catalyst. He believes that's what we saw on Tuesday, and if those rotations

become more frequent, they would be constructive for a Bitcoin low being formed. Kendrick noted tight liquidity conditions getting tighter, but added, the question for me is, when does the Fed see them as tight and react by either acknowledging said measures or stopping QT? The Fed meeting is coming up next Wednesday and Powell has already signaled he might be ready to end QT, so we might not need to wait very long at all. Kendrick's advice to investors heading into the end of the week, stay nimble and ready to buy the dip below 100K if it comes. So there you have it, guys. For now, that's going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take

care of each other. Peace.