Author|Azuma(@azuma_eth)
With only a few working days left before the U.S. Congress enters its summer recess (scheduled to begin on August 7th), 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 add an "ethics provision" to 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 was widely interpreted by the market as a sign that Trump and the Republicans had expressed a willingness to compromise, ready to reach a consensus with Democratic senators on the last major point of contention: the ethics issue.
However, as the amended details of the Clarity Act were released, the market discovered the situation is far more complicated than imagined.
Alex Thorn, head of research at Galaxy, posted over the weekend that the Clarity Act has reached the final "one-yard line." Just like in American football, that last yard can be the hardest yard on the field; politically, it's a battle where every inch is contested... Considering the limited time left and the strong opposition from the Democratic senators involved in the negotiations to the current wording of the ethics provision, the probability of the Act being enacted 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 several areas of disagreement remain in the Clarity Act, including developer protections, the regulatory boundary for DeFi, stablecoin yield restrictions, the CFTC registration mechanism, and newly added enforcement provisions.
However, the prevailing consensus in the market is that the biggest obstacle currently hindering the bill's progress remains the ethics provision, which was once interpreted as a concession Trump and the Republicans were willing to make.
According to the latest consolidated Senate text, the Clarity Act spans 616 pages. The newly added content related to the ethics provision is primarily used to restrict the president, vice president, members of Congress, and other senior federal officials from engaging in digital asset-related activities. This includes prohibiting such officials and their spouses from issuing or promoting digital assets while in office, restricting the listing of related assets on regulated platforms, requiring financial interest disclosures, and introducing a blind trust mechanism. The provision also stipulates that enforcement authority lies with the Department of Justice (DOJ) and that it will automatically expire on January 20, 2029, after the end of Trump's term.
The problem is that Democrats believe the current version of the ethics provision has significant shortcomings.
- First, Democrats argue that vesting enforcement authority solely with the DOJ lacks sufficient independence. As the DOJ is part of the executive branch, and the current Acting Attorney General, Todd Blanche, is also a former personal lawyer for Trump, doubts exist about the effectiveness of internal oversight when the targets of restriction involve the president or senior executive officials. Therefore, Democrats are demanding that enforcement authority be given to various inspectors general.
- Second, the automatic expiration clause in 2029 has drawn strong opposition and criticism from Democrats. This date coincides precisely with the end of Trump's current presidential term. This means that after Trump leaves the presidency, there would be no legal basis for his successors to investigate Trump's past actions. Democrats argue that if the goal of the Clarity Act is to establish a long-term digital asset regulatory framework, then ethical norms should also become a permanent institution, not one that terminates with Trump's presidency.
- Furthermore, Democrats are concerned that the current scope of restrictions is still limited. The current version mainly targets direct activities like issuing or promoting digital assets. However, it lacks clear restrictions on involvement in crypto profit-seeking through affiliated businesses, family members, or other indirect means. Especially considering that several of Trump's sons are deeply involved in the cryptocurrency industry, questions remain about whether the current version provides adequate coverage.
Democratic Senator Elizabeth Warren, a consistent and strong critic of the bill, issued a formal statement last week attacking the "DOJ-only enforcement" mechanism in the ethics provision, stating the bill "ought to be dead on arrival."
More impactful for vote counting, the seven Democrats (Senators Mark Warner, Angela Alsobrooks, Cory Booker, Catherine Cortez Masto, Ruben Gallego, John Hickenlooper, Raphael Warnock) who have been negotiating with Republicans also issued a joint statement, saying the current text "falls short."
As for the Republican side, they appear to show no immediate signs of further concession in response to the strong Democratic pushback. Patrick Witt, Executive Director of the White House Digital Assets Advisory Council, responded firmly, stating the President has made a historic concession, and Democrats are still not satisfied — "You can't get two home runs with one swing."
How Much Time Window Remains?
Early this morning, Senate Majority Leader John Thune indicated that the Clarity Act would be temporarily set aside to prioritize government official nomination confirmations and the Russia sanctions bill. Additionally, the Senate will lose Tuesday and Wednesday this week due to the funeral of the late Senator Lindsey Graham.
This means the time available for the Clarity Act to advance before the summer recess has been further compressed. Current market expectations suggest the Clarity Act might not enter the voting process until next week at the earliest, the final few days before the Senate recess.
Former Senate staffer Anne Kelley also posted on X today that, according to Senate rules, once a cloture motion is filed on a major, controversial bill, that bill becomes the Senate's top priority agenda item — until the amendment process is completed, a second cloture motion is filed, and up to 30 hours of formal debate are exhausted, it is very difficult for the Senate to simultaneously advance another major, controversial bill.
This means the Clarity Act not only faces the challenge of resolving its own differences in time but also must compete for the Senate's already limited voting time with other still-controversial bills like the Russia sanctions bill, appropriations bills, and the SAVE Act.
This is why, despite initial market hopes that the Clarity Act could pass before the recess, an increasing number of Washington observers are lowering their expectations.
For the crypto industry, this protracted legislative battle is now in its final stage. The regulatory framework is just "one step away" from being enacted. But whether that step will be taken in the coming days or deferred to an uncertain future will be revealed very soon.
