Shares of cryptocurrency-related companies are trading lower in Tuesday's pre-market session, with Circle Internet Corp (CRCL.US) and Coinbase Global, Inc (COIN.US) each falling more than 5%. The selloff comes as the U.S. Senate prepares for a critical procedural vote on the Digital Asset Market Clarity Act (CLARITY Act) scheduled for 2:15 PM ET, which will require at least 60 votes to advance to the next stage of the legislative process.

The proposed legislation aims to establish a comprehensive regulatory framework for cryptocurrencies and other digital assets. With Republicans currently holding 53 seats in the Senate, the outcome will hinge on Democratic support. The crypto industry is intensifying its lobbying efforts ahead of the vote, while banking groups continue to apply pressure over the bill's stablecoin provisions. Adding to the opposition, the New York Attorney General has called on Congress to block the legislation.

Industry's Final Push

Coinbase's Chief Policy Officer, Faryar Shirzad, urged Senate Democrats to support the bill just hours before the chamber's first full-floor vote on the measure. Shirzad stated that the CLARITY Act satisfies all seven priorities outlined by Senate Democrats and called on them to vote in favor during the upcoming ballot. He emphasized that the legislation currently under consideration in the Senate encompasses every element of the seven-point framework.

The framework, released by 12 Democratic senators, outlines the objectives that any crypto market structure legislation should achieve. It calls for establishing rules for spot cryptocurrency trading, clarifying which regulatory agency oversees which assets, and bringing token issuers and trading platforms within the regulatory scope. Additional pillars focus on combating illicit finance, preventing corruption, and ensuring fair and effective regulation. The anti-corruption pillar is designed to prevent officials and their families from profiting from corrupt practices.

Democrats are seeking to limit President Donald Trump's ability to profit from his family's crypto business, while Republicans argue that Democrats should support advancing the bill first and continue negotiations during Senate deliberations. Shirzad noted that the final text also incorporates 126 amendments requested by Democrats. He pointed out that the bill grants state attorneys general expanded authority and establishes stricter rules for illicit finance oversight. He added that Democratic negotiators played a significant role in bringing the bill to this point and should vote in favor.

However, crypto journalist Eleanor Terrett posted on X Monday that a group of Senate Democrats was scheduled to meet that evening to discuss a counterproposal. She had previously reported that Republicans had submitted their latest text, described as their "last, best, and final" offer. In a subsequent post, Terrett indicated that industry sources expect the counterproposal to encompass most, if not all, of the Republicans' latest modifications.

Stablecoin Yield Dispute

Journalist Eleanor Mueller reported that nearly all banking industry groups have signed a joint letter criticizing the bill's provisions on stablecoin yields, with the primary concern being that such provisions could trigger a significant outflow of bank deposits. Specifically, banks argue that interest-bearing stablecoins would create unfair competition: banks face regulatory restrictions preventing them from offering high interest on deposits, while crypto platforms could effectively provide yields through stablecoin holdings, attracting depositors to move funds away from banks and weakening their lending capacity. Although the bill includes a "circuit breaker" mechanism as a compromise, banking groups contend that this mechanism responds too slowly, and damage could occur before regulators can intervene.

Treasury Secretary Scott Bessent posted on X that the final draft grants the Treasury Secretary additional authority to respond should stablecoins begin to harm community banks. He wrote that he would not hesitate to use these tools to ensure they receive full protection if stablecoins cause damage to community banks. White House crypto advisor Patrick Witt echoed this sentiment, posting that bank deposits are actually rising rather than falling, and adding that banks would lose those protections if the bill fails to pass.

Grayscale also shared a chart indicating that the probability of the bill passing this year has surged to approximately 29%, suggesting the market is growing more optimistic about its prospects. In a letter to Senate Banking Committee Chair Tim Scott and Ranking Member Senator Elizabeth Warren, New York Attorney General Letitia James and a coalition warned that the CLARITY Act would threaten their ability to protect investors from rampant digital currency fraud and scams. The coalition stated that if the bill passes, they would be unable to combat what they describe as a growing "cryptocurrency fraud epidemic."

Although Circle and Coinbase are viewed as potential beneficiaries should the bill pass, their shares are declining pre-market amid broader weakness in the technology sector. On Stocktwits, retail sentiment toward Circle has shifted from "extremely bearish" to "bearish," with discussion activity remaining at "low" levels over the past 24 hours. Retail sentiment toward Coinbase remains "bearish," while discussion activity has risen from "low" to "normal" during the same period.