Here’s why the CLARITY Act’s ethics deal may be so hard to reach

Both parties say they want US crypto market structure legislation, but a dispute over ethics rules and who enforces them is becoming the bill’s biggest obstacle.

The long-awaited US Digital Asset Market Clarity Act (CLARITY) has hit another snag.

This time, it’s not software developers or the turf war between federal regulators at stake, but the thornier question of ethics — ironic, given many politicians’ demonstrable disdain for them.

After months of negotiations and what Coinbase’s chief executive Brian Armstrong called “thousands of hours of work on both sides,” disagreement over a code of conduct could make or break CLARITY once and for all.

Pretty much everyone agrees the United States needs clearer rules around digital assets. But negotiators are divided over whether the bill’s ethics provisions are strong enough, and, more importantly, who should enforce them.

Democrats worry the current proposal relies too heavily on the Department of Justice, arguing state attorneys general should be able to step in if the DOJ fails to enforce the law.

In a joint statement Wednesday, seven Democratic senators said the Republican proposal “falls short.”

For their part, Republicans are pushing to keep enforcement of the ethics provisions with the DOJ, arguing that federal rules should be enforced through a single national framework. Attorney and former Republican Senate candidate John Deaton said Wednesday:

Can lawmakers find a middle path before the bill reaches the Senate floor, or has the ethics debate become CLARITY’s biggest obstacle yet?

The latest Senate draft made public Wednesday would prohibit the president, vice president, members of Congress and other senior federal officials and their spouses from issuing or sponsoring digital assets while in office.

Democrats oppose current CLARITY text. Source: Senator Ruben Gallego

That means future presidential meme coins would be off the table, at least temporarily, with no Trump 2.0 or Melania 2.0-style token launches while the restrictions are in play.