2 weeks left for Clarity: State of Crypto

Senators released new text for the Clarity Act, merging two versions and addressing for the first time what an ethics provision might look like. The bill isn't yet at the finish line though.

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We have a new draft of the Digital Asset Market Clarity Act, which merges the drafts advanced by the Senate Banking and Agriculture Committees. It also adds an ethics provision that would bar senior government officials from sponsoring or issuing their own cryptocurrencies in response to President Donald Trump.

The window for passage is tightening, and while a new draft is progress, the fact that we're still waiting to see if there's bipartisan agreement on a key provision means the timeline is getting very tight indeed.

Obviously the big question is will the Clarity Act pass? If you have a definitive answer to this question, let me know and also send me next week's lottery numbers, please and thank you.

While we have new text and it does have an ethics provision, the underlying dynamics of the debate don't seem to have changed very much. The key thing to note here is that while this is a crypto bill that will result in sweeping changes to how federal regulators and their jurisdictions are defined, the biggest outstanding issue doesn't really have a lot to do with that.

Democrats want a more binding ethics provision, one that will let them actually affect Trump and the $1.4 billion he made off crypto last year, while Trump and Republicans don't want that to happen.

The ethics provision that's currently in the bill — agreed to by the White House but not Senate Democrats — essentially gives Trump a year to divest or put his businesses into a blind trust, and directs the Department of Justice to enforce the provision. Democrats' objections include that they don't trust the Department of Justice to go after Trump while he's in office, and that the provision sunsets when the next president is inaugurated and bars future administrations from retroactively going after Trump. Trump could also continue benefiting from tokens with his name on them that already exist, and there's a name-image-likeness clause.

It's worth noting here that the provision's proponents, including Senator Cynthia Lummis, argue the provision applies to a range of government officials and federal judges. White House adviser Patrick Witt, not to mention many crypto industry participants, said this is the most sweeping ethics provision any U.S. president has ever agreed to. And all of that is true.

However, it is an election year, and it is also true that a headline figure of over a billion dollars gives Democrats a pretty easy issue to run on in this year's midterm election, which will decide which party controls the House of Representatives and the Senate next year. Lummis told CoinDesk last week that negotiations over the ethics and other provisions would continue through the weekend. It's also worth noting that it's not just Democrats who have issues with the text as-is. Some Republicans have also come out with concerns about the legislation, Punchbowl News reported last week.

The consensus among industry participants is that there is still time to get the bill through the Senate before the body packs up for the August recess. Almost every party CoinDesk has spoken to, including Senate staffers from both parties, crypto industry participants and other parties with an active stake in this process, seems to want the bill to pass. There are exceptions; Senator Elizabeth Warren, the ranking Democrat on the Senate Banking Committee, said in a statement on Wednesday that the bill "should be dead on arrival," citing concerns with investor protection, national security and other provisions, not to mention Trump's crypto ties.

The crypto industry, naturally, is urging passage. The common refrain online is that Clarity includes some investor protection rules and creates some structure for crypto products, while not passing the bill would mean there are no investor protections.