Senate Blocks Crypto Bill & Dave and Buster’s Joyless Quarter

John Groteau (0:00)

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Hanna Horvath (0:36)

Crypto's push to go mainstream just hit a snag in the Senate.

Dylan Lewis (0:39)

For banks, deal making takes a summer vacation.

Hanna Horvath (0:42)

For Tuesday, September 15th, it's Brew Markets Daily. I'm Hanna Horvath.

Dylan Lewis (0:46)

I'm Dylan Lewis. Let's get moving and grooving.

Hanna Horvath (0:56)

Let's start the show with Crypto. One of the biggest attempts to write the rules for crypto in the United States just hit a pretty major roadblock. The Senate failed to advance the Clarity Act this afternoon, falling short of the 60 votes it needed. While this wasn't a final vote on the bill, it does make the path forward a lot harder with limited time left on the congressional calendar. Dylan, Markets knew the vote was going to be close. How much of this failure was already priced in?

Dylan Lewis (1:21)

Yeah, I mean, based on market reactions, I think there was some hope that this would come together, but I don't know that there was a ton banking on the passage. We see Coinbase down about 8% today. They're still up for the month. We see Bitcoin down about 3% today, still holding on to most of its recent rally as people have been processing the macro environment and hedging a little bit on things like inflation. So I think there was a healthy amount of skepticism that was priced into the bill passing.

You would kind of have to remember. I mean, this is something that first passed the House last year. It has been debated fiercely in the Senate. Even if it had passed a Senate vote today, the bill had been changed, so it would have gone back to the House for voting again, which is a very long way of saying it has been a very long road to get here. And I don't know if people were really expecting anything too, too serious.

Hanna Horvath (2:04)

Yeah, and I just want to take a second to explain what the Clarity Act was actually trying to fix here.

Crypto has spent years in this very weird regulatory gray area, and this act was hoping to establish the first federal framework for cryptocurrency in two sort of main ways. One was creating a legal path for stable coins, which are a type of cryptocurrency whose value is tied or pegged to another asset, such as the US dollar, for example. And the second is to divide the regulatory power of crypto between the SEC, which is short for Securities and Exchange Commission, and the CFTC, which is short for Commodity Futures Trading Commission. So essentially, the aim was to bring these digital assets into the mainstream financial system, give the industry one clear rule book, because from an investing perspective, the current uncertainty has a cost. Dylan, you were talking about this idea of a regulatory discount.

Dylan Lewis (2:52)

Yeah, I think even as adoption for crypto has grown, and it's grown tremendously over the last five years, we've seen a financialization of it in a really incredible way.

It still has this really big cloud hanging over it because on some level, firms and businesses have to discount the possibility that they might be doing something outside of compliance, they might be doing something that leads to a lawsuit, or something that may affect their ability to operate successfully in an industry. And this is something that is true across the board, businesses hate risk, but it is particularly true in a heavily regulated space like banking and in finance. And so I think we have seen more crypto forward institutions looking for passage here to help give them a sense of the rules of the road so they can minimize those risks operating in the future.

Hanna Horvath (3:36)

Yeah, you know, Wall Street doesn't necessarily need the rules to be easy, it just needs to know what those rules are. And that matters for companies that are betting on crypto becoming a bigger part of this mainstream finance. You know, you pointed to these crypto forward institutions, for example, take Coinbase, which wants to be more than a place just to trade Bitcoin. It wants to power those things like stablecoins and payments and institutional crypto. Another company Circle is making an even more direct bet. It runs one of the biggest stablecoins, the USDC token that's pegged to the US dollar by one-to-one ratio and backed by $1 in reserve assets. So if stablecoins become a more prominent way that people hold and move the US dollar, Circle has a lot to gain here.