Almost there—what’s actually blocking the Clarity Act?

Original by Odaily (@OdailyChina)

Author: Azuma (@azuma_eth)

With only a few working days left before the U.S. Congress enters its summer recess (expected to begin August 7), time is running out for the "Digital Asset Market Structure Act" (hereinafter referred to as the Clarity Act) to pass through the Senate.

Last week, the White House agreed to include an "ethics provision" in the Clarity Act aimed at restricting the President, Vice President, members of Congress, and other federal officials from profiting from digital assets while in office. This move was widely interpreted by the market as a signal of compromise from Trump and the Republican Party, indicating a willingness to reach consensus with Democratic senators on the ethics issue—the last major point of divergence.

However, with the release of the Clarity Act's amendment details, the market has discovered that the situation is far more complex than previously imagined.

Alex Thorn, Head of Research at Galaxy, stated in a weekend post that the Clarity Act has reached the "one-yard line." Just like in American football, this last yard may be the most difficult on the field, representing a political battle over every inch of ground... Given the limited time remaining and the strong opposition from Democratic senators involved in the negotiations to the current wording of the ethics provision, the probability of the bill being passed in 2026 has been downgraded to 30%.

The Biggest Disagreement Lies in the Details of the Ethics Provision

In his post, Alex Thorn summarized that the Clarity Act currently faces varying degrees of disagreement on multiple fronts, including developer protection, DeFi regulatory boundaries, stablecoin yield restrictions, the CFTC registration mechanism, and newly added enforcement provisions.

However, the prevailing consensus in the market is that the biggest obstacle hindering the bill's progress remains the ethics provision—the very issue previously interpreted as an area where Trump and the Republicans were willing to back down.

According to the latest merged Senate text, the Clarity Act comprises 616 pages. The newly added ethics provisions primarily aim to restrict the President, Vice President, members of Congress, and other senior federal officials from engaging in digital asset-related activities. These include prohibiting these officials and their spouses from issuing or promoting digital assets while in office, restricting the listing of related assets on regulated platforms, requiring disclosure of interests, and introducing a blind trust mechanism. Additionally, the provision stipulates that enforcement authority rests with the Department of Justice (DOJ) and will automatically expire on January 20, 2029, at the end of Trump's term.

The problem lies in the Democrats' belief that the current version of the ethics provision still has significant shortcomings.

• First, Democrats argue that placing enforcement authority solely with the DOJ lacks sufficient independence. Since the DOJ is part of the executive branch, and the current acting Attorney General, Todd Blanche, also served as Trump's former personal attorney, the effectiveness of internal oversight is questionable when the restrictions involve the President or senior executive officials. Therefore, Democrats demand that enforcement authority be handed over to various Inspectors General.
• Second, the automatic expiration clause in 2029 has also drawn strong opposition and criticism from Democrats. This timeline precisely coincides with the end of Trump's current presidential term, meaning that after Trump leaves office, future officials would have no legal basis to investigate his past actions. Democrats argue that if the Clarity Act aims to establish a long-term digital asset regulatory framework, the ethical standards should be a permanent institution, not one that terminates with Trump's term.
• Additionally, Democrats worry that the scope of the current restrictions remains limited. The current version primarily targets direct actions like issuing or promoting digital assets but lacks clear limitations on indirectly participating in crypto profit generation through affiliated companies, family members, or other means. Especially given that Trump's several sons are deeply involved in the cryptocurrency industry, questions remain about whether the current version's coverage is adequate.

Democratic Senator Elizabeth Warren, a consistent and vocal critic of the bill, last week criticized the "DOJ-only enforcement" mechanism in the ethics provisions through a formal statement and claimed the bill "should be rejected upon arrival."

More impactful to vote counting is that seven Democrats who have been negotiating with Republicans (Sens. Mark Warner, Angela Alsobrooks, Cory Booker, Catherine Cortez Masto, Ruben Gallego, John Hickenlooper, Raphael Warnock) also issued a joint statement, stating that the current text "falls short of expectations."

On the Republican side, there seems to be no immediate indication of further concessions in response to the strong Democratic pushback. Patrick Witt, Executive Director of the White House Digital Asset Advisory Council, responded firmly, stating that the President has already made a historic concession, yet the Democrats remain unsatisfied — "You can't hit a home run twice in one at-bat."

How Much Time Is Left in the Window?

Early this morning, Senate Majority Leader John Thune indicated that the Clarity Act would be temporarily sidelined, prioritizing the confirmation of government official nominations and the sanctions bill against Russia. Additionally, the Senate's schedule this week will also be impacted by the funeral of the late Senator Lindsey Graham, occupying Tuesday and Wednesday.

This means that the time available for advancing the Clarity Act before the summer recess has been further compressed. Current market expectations are that the Clarity Act might not reach a voting procedure until as late as next week, the final days before the Senate recess.

Former Senate staffer Anne Kelley also posted on X today, explaining that under Senate rules, once cloture is invoked on a significant and controversial bill, that bill becomes the Senate's top priority — making it difficult for the Senate to simultaneously advance another major, controversial bill before completing amendment consideration, invoking cloture again, and undergoing up to 30 hours of formal debate.

This implies that the Clarity Act not only needs to resolve its own internal disagreements in time but also must compete with other contentious bills—like the Russia sanctions bill, the budget bill, and the SAVE Act—for the Senate's already limited floor time.

This is why, despite market hopes that the Clarity Act could cross the finish line before the recess, an increasing number of Washington observers are lowering their expectations.

For the crypto industry, this long legislative battle has now entered its final stage. The regulatory framework is just one step away from enactment, but whether that step will be taken in the coming days or postponed indefinitely to an uncertain future, the answer will soon be revealed.