White House concession clears ethical hurdles, Clarity Act races against the final time window before recess?

Original by Odaily Planet Daily (@OdailyChina)

Author: Azuma (@azuma_eth)

On July 21, Beijing time, multiple industry sources revealed that the Trump administration has agreed to include an ethics provision in the "Clarity Act" (Digital Asset Market Structure Bill), with the relevant text now submitted to some Republican senators. Although the specific details of the clause have not been fully disclosed, industry participants generally believe that this progress may pave the way for an update of the bill's text (expected to be announced in the coming days) and subsequent Senate voting.

Over the past year, negotiations surrounding the "Clarity Act" have progressed slowly. After the parties gradually reached compromises on early differences such as stablecoin yields and DeFi regulation, the remaining major dispute has been how to address potential conflicts of interest between U.S. government officials and the crypto industry. With the White House signaling a willingness to concede on the ethics clause, the possibility of resolving the last obstacle that has long hindered the bill's advancement is emerging.

In addition to the progress on the ethics clause, another positive signal regarding the "Clarity Act's" passage emerged this morning: Patrick Witt, Executive Director of the White House Digital Assets Advisory Council responsible for driving the bill's implementation, has confirmed he will remain in his position to help the bill complete its final sprint. Earlier reports suggested that Witt might have left his post before the "Clarity Act" entered a critical phase in the Senate due to required training obligations with the U.S. Army National Guard, which once raised industry concerns about the bill's progress. However, Witt has now confirmed that the training mission will be postponed, allowing him to continue participating in the bill's legislative process.

For the entire cryptocurrency industry, the latest developments may signal that this nearly year-long regulatory negotiation has finally reached its most critical turning point.

Content and Significance of the Clarity Act (Familiar readers may skip)

As one of the core legislative initiatives of the Trump administration aimed at making the U.S. a "global crypto hub," the "Clarity Act," officially titled the "Digital Asset Market Clarity Act of 2025," seeks to establish a unified federal regulatory framework for the U.S. digital asset market.

The core objective of the bill is to resolve the long-standing regulatory ambiguity faced by the U.S. crypto industry over the past few years — clarifying the legal attributes of different digital assets and redefining the regulatory responsibilities between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Specifically, the Clarity Act attempts to establish a classification system for digital assets, distinguishing them as digital commodities, investment contract assets, and permitted payment stablecoins. Among these, digital commodities with functional attributes of blockchain networks would be primarily regulated by the CFTC; investment contract assets involving financing issuances would continue to be overseen by the SEC; and stablecoin issuers would primarily be regulated by banking regulators.

The significance of this framework lies in ending the years-long jurisdictional dispute between the SEC and CFTC over digital asset regulation, providing the industry with a clearer compliance path. In the past, under former SEC Chair Gary Gensler, the SEC tended to classify many digital assets as securities based on the Howey Test, expanding its regulatory scope through enforcement actions. Meanwhile, the CFTC argued that some highly decentralized digital assets were closer to commodities and should fall under its jurisdiction. This long-standing conflict over regulatory boundaries kept U.S. crypto companies, trading platforms, and developers in a state of uncertainty.

If the Clarity Act is ultimately passed, the U.S. crypto industry may usher in its first comprehensive market structure regulatory framework. For the market, its short-term impact may lie in boosting market sentiment through improved policy expectations, but its longer-term significance lies in reducing regulatory uncertainty, providing a clearer institutional foundation for traditional financial institutions and long-term capital to enter the digital asset space.

The Last Disagreement: The Ethics Controversy

The Clarity Act hasn't come this far easily. On July 17 last year, the Clarity Act passed the U.S. House of Representatives with a vote of 294 to 134, garnering support far exceeding a simple majority. However, unlike the GENIUS Act, which progressed smoothly and was eventually signed by President Trump, the Clarity Act encountered more complex political maneuvering after being sent to the Senate.

Although Republicans still hold a majority in the Senate compared to the House, the Clarity Act, as a major regulatory piece of legislation affecting the entire digital asset market structure, still requires a certain degree of bipartisan support to pass a final vote. This means the bill faces a complex negotiation in the Senate revolving around regulatory direction, industry interests, and political demands.

Over the past year, differences surrounding the Clarity Act have mainly focused on three areas: stablecoin yield rules, the boundaries of DeFi regulation, and potential conflicts of interest between the Trump administration and the crypto industry. Today, the first two major differences have gradually cooled down as negotiations progressed. Regarding the once most contentious issue of stablecoin yields, the parties have now reached a compromise: "Prohibiting earning yields merely from holding stablecoins but allowing rewards based on actual activities."

Now, the only remaining issue on the negotiating table is the final disagreement: the ethics issue. Over the past year of negotiations, members of Congress and the White House have spent considerable time negotiating ethical clauses aimed at limiting the ability of the President, Vice President, members of Congress, and other federal officials to profit from digital assets while in office (see Trump's "Pay Stub" Revealed: $1.4 Billion in Crypto Revenue, Over 22,000 Stock Trades). With the latest news this morning, a new breakthrough has emerged in the final political game surrounding the "Clarity Act."

More Urgent Than Content Disputes: Time

However, more pressing than the disputes over the bill's content is the issue of time facing the "Clarity Act." The U.S. Congress typically enters its summer recess (August recess) around mid-August, leaving only a dozen or so working days for the two parties to finalize the text and push for Senate consideration.

Kristin Smith, CEO of the Blockchain Association, which has played a significant lobbying role in the "Clarity Act" process, stated bluntly yesterday: "Now is the most critical moment."

Smith stated that the "Clarity Act" has come a long way. The current version already incorporates stronger illicit finance regulations, more comprehensive consumer protection measures, and enhanced regulatory requirements for spot trading platforms, making it one of the most comprehensive digital asset market structure frameworks she has seen. If both sides can resolve the ethics-related disputes in the coming weeks, the "Clarity Act" might have a chance to achieve a critical breakthrough before Congress recesses. However, if negotiations stall again, this crypto regulatory framework, which has been brewing for over a year, may have to wait for a new political window.

A Historic Turning Point for Crypto Regulation?

Of course, there is still a final step before the "Clarity Act" is truly enacted. Even though the White House has agreed to accept the ethics clause, uncertainties remain regarding the subsequent release of the text, Senate deliberations, and final bipartisan coordination. However, based on the signals released so far, this digital asset market structure bill, which has been negotiated for over a year, is getting closer and closer to the finish line.

If the "Clarity Act" can achieve a breakthrough before the August 10 recess, it could become an important turning point in the history of cryptocurrency regulation in the United States and even globally. Over the past few years, one of the biggest challenges for the global crypto industry has not been a lack of market demand, but rather the absence of a sufficiently clear, stable, and predictable regulatory framework. Different jurisdictions have vastly different rules regarding the attributes of digital assets, the responsibilities of trading platforms, and issuance rules, forcing businesses and capital to constantly navigate a changing regulatory environment to find development paths.

The significance of the "Clarity Act" lies precisely in its attempt to establish a clearer set of rules for digital assets through legislation. Once enacted, this framework could provide an important reference model for the global market. For trading platforms, this means clearer registration and operational pathways; for developers, it means a more predictable environment for innovation; for traditional financial institutions, it means having a clearer compliance basis when entering the digital asset space.

This is not just an upgrade of the U.S.'s own regulatory system. It represents a broader shift for the global digital asset market, moving from the early stage of regulatory exploration towards a more mature and institutionalized phase of development.

Recommended Reading:

CLARITY Act Countdown: 25 Days Left – What Will Happen to the Crypto Market If It Fails to Pass Before the August Recess?