House panel approves first federal crypto tax framework, one day after Senate’s Clarity Act stumbles

Bitcoin plummeted on Wednesday, further declining from the previous day's losses due to the U.S. Senate's rejection of the Clarity Act, and additional fear ahead of the Federal Reserve's upcoming decision. Following the Senate's decision on Tuesday evening, cryptocurrency prices remained in a downbeat mood, with worries about intensifying global tensions in the Middle East and increasing Treasury yields adding to the pressure.

Bitcoin's value dipped 1.3% to $76,063.1 by 06:14 ET (10:14 GMT). The Clarity Act, a piece of legislation intended to establish a wider regulatory structure for cryptocurrencies in the United States, was rejected by the Senate by a narrow margin of 49-50 votes. The measure had seen strong support from most Republicans, a group that includes Donald Trump's administration, who had advocated for the bill to create a more comprehensive regulatory framework for crypto in the U.S. However, the bill faced significant delays due to ongoing disputes over preventing insider trading among federal officials and the treatment of stablecoin yield payments.

Although the bill's defeat doesn't rule out the possibility of it being passed in later sessions, the chances of that happening in the near future appear remote. The rejection of the Clarity Act led to a sharp drop in Bitcoin and other cryptocurrency prices, as investors believed the legislation would bolster the industry's credibility.

Despite this, some proponents of crypto, such as Coinbase CEO Brian Armstrong, argued that U.S. market regulators, primarily the SEC and CFTC, could still create comparable regulations for crypto without congressional approval. However, these regulations could be susceptible to major shifts in the political climate and administration.

Beyond Bitcoin, other cryptocurrencies also experienced a decline on Wednesday, as investors adopted a more cautious stance before a crucial Federal Reserve decision later in the day. The central bank is widely anticipated to raise interest rates by 25 basis points, with an emphasis on Chair Kevin Warsh's expectations for the upcoming months.

Warsh has largely affirmed his commitment to the Fed's 2% annual inflation target, which could necessitate a more aggressive stance, given that U.S. inflation is persistently above the target. Higher interest rates are unfavorable for cryptocurrencies as they lessen the appeal of investing in speculative, high-risk assets. Other major cryptocurrencies, such as Ether, XRP, Solana, Cardano, and BNB, also saw their values decrease by 3.3%, 8%, 3.8%, 5.6%, and 1.2%, respectively, following the Clarity Act's failure. Among meme coins, Dogecoin experienced a 3.7% drop, and $TRUMP lost over 5%.