Democratic Senator Elizabeth Warren has maintained her strong opposition to the broader crypto market bill, the CLARITY Act. Amid increasing uncertainty about the bill’s path and the industry’s push for a Senate floor vote, Sen. Warren said,
As currently drafted, the CLARITY Act is a ticket to sanctions evasion.
She was echoing concerns raised by Richard Nephew, a former special envoy for Iran and director for Iran at the U.S National Security Council (NSC). Nephew called out the Senate for pushing the CLARITY Act with broader exemption for DeFi and weak anti-money laundering (AML) requirements.
For him, the recent freezing of over $1B of Iranian crypto by the U.S Treasury would be impossible with DeFi legal exemptions proposed in the bill. He added,
The bill would leave parts of the crypto ecosystem vulnerable to exploitation by terrorists, sanctions evaders, fraudsters, and other illicit actors under the guise of technological neutrality.
Here, it’s worth pointing out that the banking lobby is also against the bill. Initially, the lobby pushed against the legislation because of stablecoin yield. However, its recent opposition has increasingly been framed using the ‘illicit finance’ narrative.
White House downplays Sen. Warren’s concerns
In response to Sen. Warren, White House’s Chief Crypto Advisor Patrick Witt directed a jab at the lawmaker. He commented,
I wonder how heavily your colleagues will weigh your advice on crypto legislation after the train wreck you just orchestrated in Maine.
His jab was aimed at discrediting Sen. Warren’s judgment and endorsing Graham Platner for the Maine Senate race. Platner recently stepped down from the race after an alleged sexual scandal.
However, deflective politics won’t wish away some of the key issues that have been raised over the bill, like ethics. Especially after President Donald Trump’s massive $1.4B crypto profits.
Besides, if all 53 Republicans support the bill on the floor vote, they will still need seven Democrats to hit the 60-vote threshold to pass it.
Interestingly, a section of pro-crypto Democrats have vowed to withhold support if the ethics aren’t addressed.
Surprisingly, Section 604 (so-called DeFi exemptions) has seen support from some Democrats like Sen. Ron Wyden. For Wyden, who co-sponsored the Section 604 alongside Sen. Cynthia Lummis, the provision will allow the DoJ to pursue illicit actors while protecting developers of non-custodial software. In fact, some law enforcement groups are now supporting the provision after recent talks.
That said, with a shrinking Senate Calendar, the odds of the bill’s passage have dropped to 45%.
Overall, the industry is concerned that failure to pass the bill before the August recess could push another window to the 2030s.
Final Summary
- Sen. Warren believes the crypto market structure bill, as drafted, would facilitate ‘sanctions evasion’
- The industry fears that another chance for creating bipartisan crypto rules could be postponed to the 2030s.
