The US Senate has delayed a vote on the Clarity Act until September, reducing the prospects of landmark cryptocurrency regulation being passed before November’s midterm elections as lawmakers remain divided over ethics and stablecoin provisions.

Reuters reported that Senate Majority Leader John Thune filed a cloture motion on 8 August, setting up a 15 September vote on whether to limit debate and advance the legislation, which would establish a regulatory framework for digital assets. The measure needs 60 votes to proceed, making the September vote a key test of its prospects.

The Senate left Washington for its August recess without voting on the bill, despite pressure from the crypto industry and its supporters to secure progress before the break. Ian Katz, managing partner at Capital Alpha Partners, told The Hill that “the odds drop in September” because lawmakers have a limited number of legislative days and competing priorities.

The timetable is particularly tight because the Senate returns on 14 September and is scheduled to sit for only 14 days before the October election recess, according to Reuters. If the bill is delayed into 2027, analysts cited by the news agency expect a change in the political balance of Congress to make its passage more difficult.

The main obstacle remains an ethics provision covering government officials and their involvement in digital assets, according to The Hill. Democrats want stronger enforcement powers for state attorneys general, while a White House-backed proposal would give the Justice Department responsibility for enforcing restrictions on officials issuing or sponsoring digital assets.

Senator Cynthia Lummis, a Wyoming Republican who has helped negotiate the legislation, acknowledged the difficulties following the delay, writing on social media: “Death by 1,000 cuts is just as fatal as a bullet.”

The bill faces further opposition over stablecoins and their potential impact on bank deposits. Reuters reported that banks have argued restrictions on rewards paid to holders of dollar-backed stablecoins are needed to prevent deposits moving away from lenders, while some Republican senators want stronger protections for community banks.

Rebeca Romero Rainey, chief executive of the Independent Community Bankers of America, said lenders would continue campaigning for changes, stating: “We are leaving no stone unturned so that lawmakers recognise the danger of deposit flight as the bill is written.”

Crypto industry representatives remain hopeful despite the delay. Cody Carbone, chief executive of trade group the Digital Chamber, said the postponement was disappointing but that “the fight is far from over”.

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