Clarity Act Faces Another Crisis... Trump's Crypto Conflict of Interest Issue Remains Untouched

▲ Clarity Act amendment revealed... DeFi and credit union provisions changed, Trump's conflict of interest issue excluded/AI-generated image

The Clarity Act, a U.S. cryptocurrency market structure bill, has entered a final negotiation phase ahead of a Senate cloture vote scheduled for the 15th (local time). Although Republicans released an amendment reflecting discussions held during the August recess, it is reported that the ethics provisions addressing the cryptocurrency conflict of interest issues involving President Donald Trump and his family have largely been left untouched, once again increasing uncertainty surrounding the bill's passage.

According to Eleanor Terrett, host of Crypto in America, on the 11th, the Clarity Act amendment released by Republican senators includes mandatory registration of decentralized DeFi protocols with the U.S. Commodity Futures Trading Commission (CFTC), restrictions on spot or cash-based digital commodity trading under DeFi regulations, and clarification of credit unions' authority to handle cryptocurrencies. However, there were no significant changes to the ethics provisions related to President Trump's cryptocurrency conflict of interest issue, and the White House reportedly did not issue any particular statement.

Pressure from the banking sector regarding stablecoin reward regulations has also emerged as a variable. Banking groups, including the American Bankers Association (ABA), sent a joint letter to Senate leadership, demanding stronger regulation of stablecoin interest, returns, and rewards under Section 10404 of the Clarity Act. The banking sector argued that the current wording could allow for indirect reward payments and insisted that not only economically and functionally equivalent methods to bank deposit interest but also substantially similar reward methods should be prohibited. They also urged the deletion of provisions allowing rewards to be paid based on stablecoin holding periods or balances.

The administration and pro-crypto lawmakers are strongly pushing for the bill's passage. Patrick Witt, Executive Director of the White House's Cryptocurrency Committee, urged Congress for a swift vote, stating that there isn't much time to pass the Clarity Act, and warned that if the bill fails, the U.S. Securities and Exchange Commission (SEC) and CFTC could pursue their own regulatory proposals. U.S. Treasury Secretary Scott Bessent also called on the Senate for quick action, and Senator Cynthia Lummis argued that since Democratic demands have been incorporated, it's time to vote in favor. Senator Lummis previously warned that if the bill fails in this session, a similar market structure bill might not have another chance until 2030.

However, the mood within Congress is far from uniformly optimistic. Republican Senators Tom Tillis and Mike Rounds warned that the bill could be defeated if there is no progress on the ethics provisions surrounding the cryptocurrency conflict of interest involving the President and his family. Renato Mariotti, a former federal prosecutor and cryptocurrency lawyer, also assessed that the likelihood of the Clarity Act passing has significantly decreased, based on the recent Washington atmosphere. Conversely, Coinbase CEO Brian Armstrong stated that both sides are very close to a resolution regarding the ethics provisions, leading to conflicting predictions.

Grayscale believes that the institutionalization of U.S. cryptocurrency regulation will continue regardless of whether the bill passes. Jack Fan, Head of Grayscale Research, noted that regulatory clarity is already progressing in several areas, citing the establishment of a federal regulatory framework through the stablecoin regulation bill GENIUS, the SEC's refinement of token issuance and security token regulations, and the CFTC's expansion of the scope for perpetual futures. However, he explained that the Clarity Act's significance remains high as a market structure bill that comprehensively distinguishes the oversight powers of the SEC and CFTC. The Senate is scheduled to hold a cloture vote at 2:15 PM local time on the 15th, and 60 votes are needed for its passage.

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