Senators draft tighter ethics clause for crypto Clarity Act

Senators Thom Tillis and Ruben Gallego have drafted new language to tighten the ethics provision of the Digital Asset Market Clarity Act, according to people briefed on the effort. The bipartisan pair has been trying to negotiate a final acceptable compromise on the section that would limit senior government officials from direct ties to cryptocurrency projects.

The ethics piece targets President Donald Trump's crypto business empire. Trump recently agreed to accept a narrow version of the ban, surprising some industry insiders. The White House called it an unprecedented ethics constraint. Democratic opponents argued the structure lets Trump comply without doing much, and that enforcement from a Justice Department led by his appointees would be weak.

Tillis and Gallego agreed to try to bridge that gap. The people said the lawmakers indicated they have struck new common ground, though they did not share details.

Spokespeople for the senators and the White House did not immediately respond to requests for comment on the status of the negotiation.

The Clarity Act has taken hit after hit in congressional deliberations. It is still moving. Two timelines are at war. The Senate calendar is notoriously difficult to navigate. Any contentious bill requires days of floor time. Each passing hour narrows the odds. Just seven days remain before the August recess, when senators will leave Washington and shift focus to the midterm elections.

The other time crunch is the negotiating table. The two parties and the White House are still working to round up the necessary 60 votes. The final effort must win over many resistant Democrats and a few reluctant Republicans. Senate Majority Leader John Thune has predicted the bill almost certainly does not have enough time to finish the Senate's multi-stage process before the break.

If it could clear an initial 60-vote hurdle before next week, that could set it on a winning path. To give that possibility its best chance, the industry wants to see Thune roll out the first motion before the end of the week on what is called "cloture," the procedure that sets a bill up for votes.

Cloture timing is complicated. It involves multiple votes stretched over days, some of which must be the sole focus of the Senate. It concludes with a 30-hour debate period and a final vote. The Senate already has other live cloture situations, including a Russia sanctions bill and a package of federal nominations.

Clarity is one of several pre-break priorities. Anything not completed by next week is shunted toward a brief window of a few weeks in September, when the Senate must finish everything before members face voters in November. That could include a federal budget process. The crypto bill will have its best chance at seizing that time if it has already built cloture momentum next week. Thune is aware the bill has not yet struck its bipartisan sweet spot.

"We will probably have a vote on the Clarity Act," Thune said Tuesday on Fox News. "We'll see if the Democrats give us the votes to get on that."

If Thune is forced to push a Clarity Act vote next week on a version Democrats say they will oppose, it would likely be a political strategy to force them to go on the record with that opposition as the November elections loom. That could spell an irreparable rift in negotiations.

"After nearly 11 months of giving almost everything asked of us, I genuinely don't know what else my Democrat colleagues need before we act," Republican negotiator Senator Cynthia Lummis said Wednesday on social media.

The remaining sticking points are narrow but stubborn. They include the ethics provision, illicit-finance protections with heavy implications for decentralized finance (DeFi), and the allowance of stablecoin rewards programs. Some Democrats have hosted anti-Clarity press events and a hearing to explain their opposition. The tougher restrictions they demand are unlikely to find legislative compromise.

DeFi advocates insist the bill must shield developers from being treated as regulated money transmitters. Some law enforcement groups have backed off earlier opposition on that point. Democrat Senator Catherine Cortez Masto has continued to try to strengthen the illicit finance protections. Patrick Witt, the White House's crypto adviser, posted on social media that his side has "made our position abundantly clear to Senator Cortez Masto for weeks."

The American Bankers Association has been lobbying again on the stablecoin yield topic that derailed the Clarity Act's progress at the start of the year. Bankers insist the compromise version meant to stop stablecoin issuers from offering rewards that look like interest did not get the job done. They want the final bill "to ensure that the prohibition on stablecoin interest and yield cannot be evaded through rewards, incentives, or other arrangements that are substantially similar to interest payments," according to a Tuesday letter to Senate leadership. Witt countered Wednesday that the negotiation had already answered that concern. "Make it sense," he concluded.

When Thune predicted the Clarity Act was unlikely to pass by next week, Witt argued there was still time in the closing days until August 7, which in grocery terms is akin to the bill's sell-by date. Many in the industry are quietly shifting their hopes to September. "Clear rules are almost here," said Coinbase CEO Brian Armstrong on Wednesday. "We're at the one yard line."

If Clarity does not pass in September, it faces a longshot in the lame-duck session after the elections. If Democrats win the House majority, and potentially the Senate, they are not likely to accept the work largely driven by Republicans. The bill could return to the drawing board.