Congress returns to Washington next week after its Fourth of July break to advance cryptocurrency legislation before the midterm election calendar begins. The Senate is preparing to move forward on the Clarity Act, with legislative counsel currently combining versions passed by the Senate Banking Committee and the Senate Agriculture Committee. Two sources told The Block that the combined text could be released as soon as next week. The timeline is constrained: the Senate has the remainder of July and the first week of August to bring the legislation to the floor, and the House is scheduled to begin its August recess at the end of July. Almost a year after the House passed its version of the bill, the Senate faces pressure to complete action before lawmakers' focus shifts to November midterm elections.
Senate Faces Unresolved Issues on Developer Protections and Ethics Restrictions
The Senate has encountered multiple obstacles while working to finalize the Clarity Act. One contested provision creates a safe harbor for non-custodial developers, clarifying that they are not money transmitters. The crypto industry has stated the provision provides legal certainty for software developers and prevents innovation from moving offshore. Law enforcement groups and Catholic leaders have warned that it could weaken safeguards against human trafficking and hinder investigations.
Earlier this week, Democratic Sen. Ron Wyden, an original cosponsor of the provision, sent a letter to Senate leadership to preserve that section in any future version of the Clarity Act. A crypto industry source told The Block that "talks [are] moving the right way."
Another unresolved issue is whether to include ethics restrictions. Lawmakers have stated that without such provisions, they will not support the Clarity Act. Negotiators from both parties have spent months discussing ethics provisions that would limit how presidents, vice presidents, members of Congress, and other federal officials can profit from digital assets while in office. The crypto industry source said 70 pages of bill text, focused on being "pro-consumer," have been added at the request of Democrats.
On Friday, a group of Democratic senators, including Sens. Wyden and Elizabeth Warren, released a joint statement raising concerns about Trump's latest financial disclosures ahead of passing crypto legislation. Last month, the Office of Government Ethics released Trump's financial disclosure report, which revealed hundreds of billions of dollars in bitcoin and ethereum tied to his family's crypto company called World Liberty Financial. The senators stated: "The disclosures heighten concerns about the President pushing Congress to pass crypto legislation in favor of the very industry he's cashing in on, the Administration's moves to exempt cryptocurrencies and service providers from existing financial services regulations, and its steps to weaken enforcement, including by disbanding the Department of Justice's National Cryptocurrency Enforcement Team."
Blockchain Association Chief Policy Officer Lindsay Fraser said lawmakers should use next week to resolve the remaining issues. "When senators return next week, the focus should be on resolving the remaining technical questions and moving the Clarity Act to the Senate floor for a vote," Fraser said in a statement sent to The Block. "Months of bipartisan negotiations have produced a strong foundation, and we continue to believe there is a path to strong Democratic support once the final issues -- including ethics provisions -- are settled."
Clarity Act Competes for Floor Time with Defense Authorization and Appropriations Bills
The Clarity Act will compete for floor time with several other legislative priorities, including appropriations measures and authorization bills. One closely watched indicator will be the National Defense Authorization Act, annual legislation that Congress is expected to pass before the August recess. A crypto industry source said: "... whatever happens with Defense Authorization (NDAA), which is a must pass, will show us how floor votes are looking in July for every bill (including possibly Clarity)."
Congress has passed one of its prioritized bills, the 21st Century ROAD to Housing Act, which includes a provision banning the Federal Reserve from issuing a central bank digital currency. Trump stated as recently as Friday that he would not sign that bill until a bill is passed that would tighten voting requirements in federal elections. The deadline for Trump to take action on the housing bill is at the end of Friday, when he can decide to veto it; if not, it becomes law.
House Financial Services Committee Plans Field Hearing on Crypto Regulation
If the Senate advances the Clarity Act, it requires the House's sign-off. On Friday morning, House Financial Services Committee Chair French Hill, R-Ark., told Fox Business that lawmakers have to get past concerns about ethics. "If we passed the Clarity Act last summer, many of the things that people are expressing concern about --- memecoin issuance, coinvestment, use of exchanges, investing in exchanges --- all that would be under a market framework of regulation, with clarity, no pun intended, and that would provide a lot of transparency to people that are concerned about the Trump's family investments," he said.
Next Friday, the House Financial Services subcommittee on digital assets will hold a "field hearing" in New York, which Hill said will "highlight" why a crypto market regulatory framework is needed.
FAQ
What is the timeline for the Senate to vote on the Clarity Act?
The Senate has the remainder of July and the first week of August to bring the Clarity Act to the floor for a vote. The House is scheduled to begin its August recess at the end of July. Two sources told The Block that the combined legislative text could be released as soon as next week.
What are the main unresolved issues in the Clarity Act negotiations?
Two primary issues remain unresolved: a provision creating a safe harbor for non-custodial developers (which some law enforcement groups oppose) and ethics restrictions that would limit how federal officials can profit from digital assets while in office. Negotiators from both parties have spent months discussing these provisions, and 70 pages of "pro-consumer" text have been added at Democrats' request.
What did Trump's financial disclosure reveal about his cryptocurrency holdings?
Last month, the Office of Government Ethics released Trump's financial disclosure report, which revealed hundreds of billions of dollars in bitcoin and ethereum tied to his family's crypto company called World Liberty Financial. Democratic senators released a joint statement Friday expressing concern about the President pushing Congress to pass crypto legislation that favors the industry he is invested in.
