A landmark crypto regulation bill backed by the digital currency industry failed to advance in the US Senate on Tuesday, as Democrats insisted on stronger limits on Donald Trump's ability to profit from the industry.

Democrats rebelled against the so-called Clarity Act in the absence of stricter controls on Trump, who reported earning more than $1bn from his crypto businesses last year. Another critical fight was over yields offered on stablecoins, which the banking industry opposed as a threat to deposits and lending. The vote tally was 49 in favour and 50 against, largely along party lines and well short of the 60 required to move the bill forward.

The failure is a massive setback to the crypto industry, which spent more than a year negotiating and record sums of lobbying dollars for a favourable market structure from the Republican-controlled US Congress. It is also a blow to Trump, who took office vowing to make the country the “crypto capital of the world”.

“This legislation failed squarely because Republicans refuse to say no to the president,” said Ruben Gallego, a Democrat from Arizona. Crypto has entered a bear market as retail investors turn their attention to volatility in AI stocks and equity markets. The price of bitcoin fell 3 per cent after the vote failed and the cryptocurrency is down 35 per cent over the past year.