WASHINGTON — The Senate Banking Committee voted Thursday to approve, mostly along party lines, legislation that would set the rules for the operation and oversight of digital asset markets, advancing a landmark bill the panel has been working on since last summer.

Months of negotiations between Republicans and Democrats resulted in only two Democrats — Sens. Ruben Gallego of Arizona and Angela Alsobrooks of Maryland — joining all Republicans in a 15-9 vote.

The lack of support from committee Democrats may portend trouble for the measure on the Senate floor, where at least seven Democrats or independents would have to vote in favor, if all Republicans are in support, to overcome a filibuster. The Senate legislation is a substitute amendment adopted Thursday to replace the text of a market structure bill passed by the House last July, requiring that chamber to take it up again if it is to become law.

Gallego and Alsobrooks, as well as other pro-cryptocurrency Democrats, said an ethics provision needs to be added to the bill and other investor protection and law enforcement improvements need to be made before they’ll support final legislation.

“I want to be clear that my vote here does not guarantee a vote on the floor,” said Gallego, ranking member of the Digital Assets Subcommittee. “Perhaps the toughest issue of all, we have come close but have not finished an agreement on [an] ethics guardrail for all elected officials. [We need] real enforceable standards for what is and is not acceptable for someone who holds public trust and shouldn’t be able to profit off an industry that they enforce or regulate.”

Alsobrooks said she has been in negotiations for more than nine months and that lawmakers still need to “find a workable way to address law enforcement’s concerns about financial crimes” and incorporate an ethics agreement.

“I want to be abundantly clear: my vote today is a vote to keep working in good faith,” Alsobrooks said. “It does not mean that I’ll be voting for the passage of the clarity act on the floor, because we still have so much work to do.”

The bill defines network tokens as “ancillary assets” and provides those that are offered, sold or distributed in connection with an investment contract an exemption from Securities and Exchange Commission registration, according to a section-by-section summary.

Most digital assets would be defined as digital commodities and regulated by the Commodity Futures Trading Commission under a related bill approved earlier this year by the Senate Agriculture Committee (S 4064).

The legislation also would set rules for law enforcement and consumer protection related to digital assets and decentralized finance; for yield paid on stablecoins; for safe harbors for software and digital asset development; and for SEC and CFTC rulemaking, among many other policies.

The stablecoin yield issue had long been a sticking point, pitting the banking sector against the cryptocurrency sector. The final text opted for language that satisfied cryptocurrency groups but not banking groups, which say it leaves room for digital asset exchanges to effectively pay interest on holdings.

Senate Banking Chairman Tim Scott, R-S.C., said the bill would protect consumers, keep crypto innovation in the United States and safeguard national security.

“It means clear disclosures, safeguards against fraud and rules that keep markets open, fair and efficient,” Scott said. “It means that if someone in South Carolina invests in digital assets, they are protected by a framework with real, enforceable legal standards.”

‘A hole in our securities laws’

Ranking member Elizabeth Warren, D-Mass., blasted the bill in her opening statement, saying it would “blow a hole in our securities laws,” put U.S. national security at risk and foster fraud.

“We’re spending our time working on a bill written by the crypto industry for the crypto industry,” Warren said. “Nothing made it into this bill that wasn’t approved by the crypto industry.”

A group of 12 pro-crypto Democrats has been working with Republicans on the bill since last summer. A previous markup in January was canceled when the chief executive of Coinbase criticized the draft bill at that point.

The agreement on stablecoin yield propelled the current draft to Thursday’s markup. But it was clear that other sticking points remained, most prominently an ethics provision.

Sen. Raphael Warnock, D-Ga., said the lack of an ethics provision was a reason he voted against the bill — even though he praised progress in negotiations over investor protections.

Like many Democrats, he is concerned about President Donald Trump’s crypto conflicts. The Trump family owns a cryptocurrency firm, World Liberty Financial, and a memecoin.

“The president’s self-dealing with digital assets is pure corruption,” Warnock said.

Sen. Chris Van Hollen, D-Md., offered an amendment that would prevent the president, vice president and members of Congress from issuing a digital asset. The measure was defeated along party lines, 11-13.

Sen. Bernie Moreno, R-Ohio, said the amendment was not germane to the bill because it dealt with an issue outside the jurisdiction of the committee. He said it would be better addressed by the Senate Judiciary Committee.

He also chided Van Hollen for what Moreno said was an assumption that Trump’s crypto activities are unlawful.

“To say with no knowledge that he is committing a crime is a disgrace,” Moreno said. “We can have political conversations about policies. We don’t have to turn everything into an ad hominem attack on the president of the United States.”

Van Hollen’s amendment was one of 12 from Democrats that were rejected along party lines. Another three Democratic amendments were withdrawn.

Republicans put forward eight amendments. Among them were five at the end of the markup offered by Digital Assets Subcommittee Chairman Cynthia Lummis, R-Wyo. They would strengthen provisions on insider trading of digital assets and investor protection enforcement, among other issues.

The Lummis amendments were approved with five Democrats in support — Sens. Mark Warner, D-Va.; Catherine Cortez Masto, D-Nev.; Warnock, Gallego and Alsobrooks.

Scott said he brought them up in order to increase bipartisan support.

Warren said none of Lummis’ amendments went nearly far enough to fix problems in the bill.

She also criticized Scott for blocking most Democratic amendments on technicalities and then adding the Lummis amendments at the end of the markup. Her request to add two more Democratic amendments at the end was rejected by Scott.

“I don’t understand this process,” she said.

Scott and Lummis said talks on the bill would be ongoing.

Cortez Masto thanked Republicans for “working together” with Democrats and said much progress has been made in negotiations.

“I look forward to continuing to work with you to move forward,” she said.

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