Autor Cointelegraph By Brayden Lindrea

A US senator has reportedly urged Senate Banking Chair Tim Scott to delay the markup for the crypto market structure bill until May, as banking and crypto representatives need more time to resolve disagreements over stablecoin yield provisions.US Republican Thom Tillis of North Carolina told reporters Monday that he does not expect the Senate Banking Committee to mark up the legislation, also known as the CLARITY Act, in April and has recommended that Scott schedule it for next month, according to Punchbowl News.Tillis, who has been leading discussions between crypto and banking members, reportedly told Scott: “It’s very important to me not to accelerate things, to hear everybody, and give them a rational basis for what we do accept.”Continued delays have sparked concern that the CLARITY Act may not pass before the US midterms in November, an event that US Treasury Secretary Scott Bessent said could reverse momentum of the bill.Source: Brendan Pedersen“I think if the Democrats were to take the House, which is far from my best case, then the prospects of getting a deal done will just fall apart,” Bessent said in March.CLARITY Act cannot wait any longer, crypto group saysIt comes the same day crypto advocacy group The Digital Chamber sent a letter to the Senate Banking Committee asking it to move the crypto market structure legislation forward to a Senate markup “as soon as the calendar allows.”Related: Bessent ramps up pressure on Congress to pass CLARITY ActThe banking industry has raised concerns that allowing stablecoin yield could trigger significant deposit outflows from the traditional banking system, particularly at community banks. It argues that those banks may not have enough balance-sheet flexibility to absorb such outflows without relying on higher-cost wholesale funding.Meanwhile, Coinbase CEO Brian Armstrong and others have pushed for more favorable stablecoin provisions. Last month, members of the banking and crypto industries were reportedly close to agreeing on enabling stablecoin rewards tied to crypto activity on third-party crypto platforms, but not for passive balances.The Digital Chamber noted that it has now been more than 270 days since the House passed the CLARITY Act with bipartisan support.“Clarity cannot wait,” The Digital Chamber’s government affairs director, Taylor Barr, said, adding: “More than 70 million Americans who have embraced digital assets deserve the regulatory clarity they have waited far too long for.”Source: The Digital ChamberOther members of the crypto industry have argued that moving the bill forward is more important than holding out for perfect terms.Magazine: Will the CLARITY Act be good — or bad — for DeFi?Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently. Read our Editorial Policy https://cointelegraph.com/editorial-policy

Decentralized lending platform Aave’s risk management provider has outlined two scenarios on how bad debt from the Kelp DAO exploit over the weekend could impact the ecosystem, depending on how the losses are allocated.The incident began on Saturday when hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth $293 million from Kelp DAO’s LayerZero-powered bridge and used them as collateral on Aave V3 to borrow wrapped Ether (wETH).On Monday, LlamaRisk modeled two possible scenarios for how this “bad debt” could materialize on Aave, noting that the final decision rests with Kelp DAO.The incident highlights the contagion risk in DeFi, where a single bridge exploit can trigger liquidity crunches and mass withdrawals across interconnected protocols like Aave, which has seen nearly $10 billion in value leave the protocol since the Kelp DAO exploit took place.Source: AaveTwo scenarios and potential paths forwardThe first scenario would see losses spread across all rsETH token holders on Ethereum mainnet and Ethereum layer 2s, resulting in roughly $123.7 million of bad debt on Aave while risking a 15% depeg in rsETH relative to Ether (ETH).LlamaRisk said this first scenario would spread losses more thinly across all chains, while noting that wrapped Ether (wETH) would be “absorbing the bulk in absolute terms but barely noticing it relative to its reserve depth.”Aave could also use its Umbrella security model to cover losses in wETH under the first scenario, noting that 18,922 Aave Wrapped ETH (aWETH) tokens worth nearly $43.7 million have entered the unstaking cooldown phase.The second scenario would shift the entire shortfall to Ethereum layer 2 networks, such as Arbitrum and Mantle. However, the bad debt would be significantly higher at $230.1 million.LlamaRisk also noted that Aave has around $181 million in its treasury that could be used to address a potential bad debt shortfall. Scenario comparison of LlamaRisk’s two scenarios. Source: AaveRelated: Aave DAO backs V4 mainnet plan in near-unanimous voteOn Monday, Kelp DAO said it is still assessing the financial impact of the exploit and how to safely unpause the protocol, adding that it is working with Aave, LayerZero and other stakeholders on a path forward.Kelp DAO sheds more light on the exploitKelp DAO also shared more details about the incident, saying that two nodes tied to the LayerZero bridge were compromised, while a third was hit with a distributed denial-of-service attack.The attacker forged a seemingly valid transfer message that the system approved, allowing 116,500 rsETH to be minted on one of LayerZero’s bridges.Kelp said it paused all relevant contracts on Ethereum and Ethereum layer 2s and blacklisted all wallets tied to the exploiter shortly after, preventing them from stealing another 40,000 rsETH worth $95 million.Magazine: Are DeFi devs liable for the illegal activity of others on their platforms?Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently. Read our Editorial Policy https://cointelegraph.com/editorial-policy