Almost there, but what's holding up the Clarity Act?
- Key Takeaway: The U.S. "Digital Asset Market Structure Act" (Clarity Act) faces a final window for passage before the Senate's summer recess. However, due to major disagreements between Republicans and Democrats over the enforcement authority, duration, and scope of the ethics clause, market expectations have been significantly downgraded, with the probability of the bill passing in 2026 dropping to 30%.
- Key Factors:
- Core Disagreement on Ethics Clause: Democrats oppose enforcement solely by the Department of Justice (citing a lack of independence) and demand that authority be transferred to state attorneys general. They also oppose the clause automatically expiring at the end of Trump's term (in 2029).
- Bill Text Details: The bill is 616 pages long. The newly added ethics clause restricts senior officials, including the President and their spouses, from issuing or promoting digital assets and introduces a blind trust mechanism. Democrats, however, argue its scope is insufficient to limit indirect conflicts of interest.
- Current Political Dynamics: A joint statement from seven Democratic negotiating lawmakers described the text as "not meeting expectations." Republicans maintain that "the President has already made a historic concession" and show no signs of further compromise.
- Compressed Time Window: The Senate Majority Leader has set the bill aside to prioritize nomination confirmations and sanctions legislation. This week, two days were occupied by funerals, meaning a vote is not expected until at least next week.
- Procedural Obstacles: Once a cloture motion is filed, the bill will become the top priority but must compete with other controversial legislation, such as a Russia sanctions bill, for limited Senate floor time.
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 that Trump and the Republican Party were willing to compromise and reach a consensus with Democratic senators on the remaining major point of contention — ethics issues.
However, as the details of the Clarity Act amendments were released, the market discovered the situation was far more complex than initially thought.
Galaxy's Head of Research, Alex Thorn, posted over the weekend stating that the Clarity Act is now on the "one-yard line." Just like in American football, this last yard might be the toughest on the field; politically, it is a game of hard-fought inches... Given the limited time and the strong opposition from participating Democratic senators to the current wording of the ethics provision, the probability prediction for the bill's passage in 2026 has been revised down to 30%.
The Main 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 several fronts, including developer protections, DeFi regulatory boundaries, stablecoin yield restrictions, the CFTC registration mechanism, and newly added enforcement clauses.
However, the prevailing consensus in the market is that the primary obstacle truly hindering the bill's progress remains the ethics provision, which was previously interpreted as an area where Trump and the GOP were willing to give ground.
According to the latest Senate consolidation text, the Clarity Act comprises 616 pages. The newly added content related to the ethics provision mainly restricts the President, Vice President, members of Congress, and other senior federal officials from engaging in digital asset-related activities. This includes prohibiting these officials and their spouses from issuing or promoting digital assets while in office, restricting the listing of relevant assets on regulated platforms, requiring disclosure of interests, and introducing a blind trust mechanism. Simultaneously, the provision stipulates that enforcement authority rests with the Department of Justice (DOJ) and will automatically expire on January 20, 2029, after the end of Trump's term.
The problem, according to Democrats, is that the current version of the ethics provision has significant shortcomings.
- First, Democrats believe vesting 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 previously served as Trump's personal lawyer, the effectiveness of internal oversight is questionable when the restrictions involve the President or senior executive officials. Therefore, Democrats demand the enforcement power be given to inspectors general.
- Second, the automatic expiration clause in 2029 has drawn strong criticism from Democrats. This date coincides precisely with the end of Trump's current presidential term, meaning that after Trump leaves office, future authorities would have no legal basis to investigate his past actions. Democrats argue that if the Clarity Act aims to establish a long-term regulatory framework for digital assets, the ethical standards should also be a permanent system, not one that terminates with the end of Trump's term.
- Additionally, Democrats worry the current scope of restrictions is still limited. The current version primarily targets actions like directly issuing or promoting digital assets. However, it lacks clear restrictions on indirectly obtaining crypto benefits through affiliated enterprises, family members, or other means. Given that several of Trump's sons are deeply involved in the cryptocurrency industry, there are lingering questions about the adequacy of the current version's coverage.
Democratic Senator Elizabeth Warren, a persistent critic of the bill, launched a formal statement last week attacking the "DOJ-only enforcement" mechanism in the ethics rules, claiming the bill "should be rejected upon arrival."
More impactful on vote counting is that the seven Democrats who have been negotiating with Republicans (Senators 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 sign of further concessions in response to the strong Democratic opposition. White House Director of the Digital Asset Advisory Council, Patrick Witt, firmly stated that the President has made a historic concession, yet the Democrats remain unsatisfied — "You can't hit two home runs with one swing."
How Much Time is Left?
Early this morning, Senate Majority Leader John Thune indicated he would temporarily set aside the Clarity Act to prioritize the confirmation of government official nominations and the Russia sanctions bill. Additionally, the Senate will have its schedule further disrupted this week by the funeral of the late Senator Lindsey Graham, which will consume Tuesday and Wednesday.
This means the available window for advancing the Clarity Act before the summer recess has been further compressed. Current market expectations are that the Clarity Act may not face a floor vote until at least next week, the final days before the Senate recess.
Former Senate staffer Anne Kelley also posted on X today, stating that according to Senate rules, once cloture is filed on a major, controversial bill, it becomes the Senate's top priority. Before completing the amendment process, filing a second cloture motion, and holding up to 30 hours of post-cloture debate, the Senate would find it very difficult to simultaneously advance another major, controversial piece of legislation.
This implies that the Clarity Act not only must resolve its internal disagreements in time but also needs to compete for the Senate's already limited floor time against other contentious bills like the Russia sanctions bill, the budget bill, and the SAVE Act.
This is why, although the market once hoped 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 lengthy legislative battle is now in its final stage. The regulatory framework is just one step away from becoming law. Whether that step will be taken in the coming days or postponed indefinitely to an uncertain future will be revealed soon.
