'How the hell are we going to tackle this?': Lawmakers flummoxed as they continue push for crypto legislation before October

Lawmakers will have to contend with how to define cryptocurrencies, address President Donald $Trump's crypto interests, and ultimately finalize rules for the industry, all before a self-imposed Sept. 30 deadline.

During a Senate Banking Committee hearing on Wednesday titled "From Wall Street to Web3: Building Tomorrow's Digital Asset Markets," Sen. John Kennedy, R-La., said he agreed that digital assets needed different rules than more traditional finance, but compared the situation to trying to write rules for the internet as a challenge.

"Well, we let the current generation of the internet draft their own rules, and frankly, it looks like what we got as a result looks like somebody knocked over a urine sample," Kennedy said. "Congress can't even agree on basic legislation dealing with privacy on the internet — how the hell are we going to tackle this?"

And lawmakers are trying to tackle drafting sweeping rules for the crypto industry in hopes of getting something done in the Senate in the coming months.

Republican Sens. Cynthia Lummis, Thom Tillis, and Senate Banking Committee Chair Tim Scott released principles for market structure legislation last month. Those principles include a Securities and Exchange Commission exemption for "certain digital asset fundraising" and requirements that customers' funds are protected during bankruptcy proceedings. At the time, Scott said he wanted to advance that legislation by the end of September.

The House has forged ahead with its version of a market structure bill through the Clarity Act. The bill looks to create a clear regulatory framework for crypto in part through designating how the SEC and the Commodity Futures Trading Commission will regulate. Two pivotal committees passed the bill, teeing it up for the full House for a vote next week.

Sen. Tina Smith, D-Minn., said lawmakers need to ensure consumers are protected, not just put forward a "stamp of legitimacy" over the industry. Smith took issue with a part of the Clarity Act that she said would block any digital asset from being regulated if it resembled a collectible or art, or has utility.

"That seems like a pretty big loophole to me," Smith said.

It's unclear exactly what would be categorized as digital commodities under the act's definition, said Timothy Massad, former chair of the CFTC and testifying at the hearing. That definition seems to encompass Bitcoin and other native tokens, but said hundred of other listed tokens may not be regulated.

"The question is, how many of those would be regulated by this?" Massad said. "I think it would only be a handful — that's a real problem."

President Donald $Trump's crypto interests came up again during Wednesday's hearing. Many Democrats have criticized $Trump's ties to World Liberty Financial's DeFi and stablecoin project, and from the $TRUMP and $MELANIA memecoin launches. Bloomberg reported that $Trump profited some $620 million in recent months from his crypto ventures.

In prepared remarks, Sen. Elizabeth Warren, D-Mass., said legislation should "shut down the president's crypto corruption" by blocking public officials, including the president, from issuing, profiting, and sponsoring tokens.