Lawmakers blocked the Clarity Act on Tuesday a procedural vote, with the long-awaited legislation missing the 60 votes needed to advance it.
Senators mostly voted against advancing the legislation — 49 for and 50 against — that the digital asset industry has long called for.
The bill aims to formally divide oversight between regulators, distinguishing which digital assets are securities, commodities or stablecoins. President Donald Trump last month urged lawmakers to pass it but Republicans said that Democrats were deliberately holding it back.
Bitcoins price dropped sharply on the news and was recently trading for $75,997, a 4% 24-hour drop.
Both Republicans and Democrats blocked the bill but Democrats had mostly been accused of trying to deliberately stall it by pro-crypto lawmakers for months.
Democratic Senator Elizabeth Warren, of the crypto industrys loudest critics, told congress ahead of the vote that the bill “posed a massive risk to families.”
“This bill would put us all at risk of a crypto-fuelled economic crash,” she said, adding that the U.S. still needed proper crypto legislation.
Warrens biggest gripe — along with other lawmakers — is that Trump has unfairly benefited from deals in the crypto industry.
President Donald Trump campaigned on a ticket to help the crypto space but some Washington lawmakers have criticized the way the Trump family has profited from digital asset ventures, such as the Presidents memecoin, $TRUMP, and World Liberty Financial project.
Trump and the White House have always denied any conflicts of interest.
“Trump won big time on crypto,” Warren added.
A revised draft circulated in July added an ethics title aimed at officials profiting from crypto. It would bar the president, vice president, members of Congress, federal judges and their spouses from issuing or sponsoring a digital asset for compensation.
Late Sunday, a further draft gave state attorneys general power to sue to enforce those rules — alongside the Justice Department, which Democrats had argued could not be relied on to act against Trump.