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A cryptocurrency regulation bill is facing a make-or-break moment as senators seek to resolve remaining policy disputes in the next four-week stretch, which experts warn is likely the last window to pass the legislation before the midterm elections.
Bipartisan negotiations over the Clarity Act, which aims to provide a regulatory framework for the digital assets industry, are coming down to the wire ahead of Congress’ monthlong August recess.
Republicans and crypto-friendly Democrats still have yet to reach agreements on key sticking points, like ethics rules for government officials and illicit finance.
If the bill fails to move forward before lawmakers leave town next month, there is little room in the calendar for another push before the midterms, which could shift control of Congress and send the legislation back to the starting line.
“In order to pass a cryptocurrency market structure bill this year, we think Congress needs to finish the bill before the August recess,” Brian Gardner, chief Washington policy strategist at the wealth management and investment banking firm Stifel, wrote in a note in late June.
“Passing a bill during the lame duck session following the midterm elections is hypothetically possible, but unlikely,” he said, adding, “We expect that talks will continue, but the calendar is the enemy. Time is running short. “
Senators have been negotiating the Clarity Act, the centerpiece of the crypto industry’s legislative aspirations, since last fall. The House’s version of the bill passed last July alongside the GENIUS Act, which was quickly signed into law by President Trump.
The GENIUS Act created a regulatory framework for a narrow subset of digital assets known as stablecoins. These digital tokens are tied to more stable assets, like the U.S. dollar. By contrast, the Clarity Act would cover a much broader swath of the industry.
But the bill has advanced haltingly through the upper chamber, which developed its own version of the legislation.
The Clarity Act passed out of the Senate Agriculture Committee along partisan lines in January but hit a snag in the Senate Banking Committee amid a dispute over a stablecoin rewards provision. The banking panel ultimately voted to move the bill forward in May.
Democratic Sens. Ruben Gallego (Ariz.) and Angela Alsobrooks (Md.), joined their Republican colleagues in supporting the measure but warned this did not guarantee they would vote for it on the Senate floor.
GOP leadership is aiming to start consideration of the Clarity Act during the week of July 20, an industry source told The Hill.
But several key sticking points remain that could imperil Democratic support. At least seven Democratic votes are needed to get the bill across the finish line.
Ethics have loomed over bipartisan negotiations from the beginning. Democrats are pushing for a provision placing limits on how elected officials, most notably the president, can be involved in the industry.
This has been a central concern given Trump and his family’s various crypto ventures. The president’s financial disclosures, which were released last week, have further inflamed this dispute at a crucial moment.
The disclosures showed Trump made about $1.2 billion in crypto-related income last year, with about $594 million coming from World Liberty Financial and $635 million in connection with the president’s meme coins.
Top Senate Democrats, including Sens. Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.), Gary Peters (D-Mich.), Dick Durbin (D-Ill.) and Ron Wyden (D-Ore.), argued Friday that the disclosures “heighten concerns about the President pushing Congress to pass crypto legislation in favor of the very industry he’s cashing in on.”
“Like World Cup matches, legislation can have momentum swings, and the past week wasn’t a positive shift for the bill,” Ian Katz, managing partner at Capital Alpha, said in a note Monday.
Trump’s disclosures “won’t be helpful to the ongoing negotiations,” Katz added, calling ethics the “biggest substantive obstacle” for the Clarity Act.
One proposal currently up for consideration is giving state attorneys general the power to sue federal officials who violate ethics provisions or to sue exchanges that list tokens backed by a federal official, the industry source said.
However, there has been little movement on the issue in recent weeks, according to a source familiar with negotiations.
Another key hurdle has been law enforcement concerns with a provision shielding software developers from liability. It would declare that developers who don’t control customer funds are not considered money transmitters under the law.
Law enforcement has argued this exemption is too broad and could make it hard to track down bad actors on the platforms, finding support from Democrats like Sen. Catherine Cortez Masto (Nev.).
There appears to be some positive momentum on the issue.
The Major County Sheriffs of America, which raised concerns about the Clarity Act in May, shifted their stance to “neutral” last week, citing “continued review” of the bill.
Cortez Masto’s office, the White House and Treasury Department are jointly drafting targeted changes to the provision, the industry source said.
Yet another dispute is centered on the commissioners at the two financial regulators that would be tasked with overseeing the industry — the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
Both are typically led by a five-member bipartisan commission. The SEC currently has three Republican commissioners and no Democratic commissioners, while the CFTC has dwindled down to a single Republican commissioner.
Democrats want to see two Democratic nominees for each regulator, a source familiar with negotiations told The Hill.
In a letter to Senate leaders Thursday, the White House said it had “already solicited suitable Democratic names” for both the SEC and CFTC but has “not received names in response to this request.”
Meanwhile, the banking industry is keeping up its push for changes to the Clarity Act.
It has argued the GENIUS Act’s ban on stablecoin interest left open a loophole allowing crypto firms to offer rewards through third parties and has pushed for a fix in the Clarity Act.
After months of negotiations, lawmakers struck a deal on language in early May. But the banking industry argues it “falls short.”
The Independent Community Bankers of America (ICBA) recently launched an advertising campaign taking aim at the crypto industry.
“American families don’t want experiments with their money,” the 30-second ad spot says. “They want jobs, growth and available credit. When crypto gets a free pass, communities pay the price.”
The chief concern among banks, particularly community banks, is that stablecoin rewards could lead to significant outflows of deposits, which they rely on to offer lending.
“A lot of what we’re trying to do is ask the question — why are we rushing this? Why are we trying to move this so quickly?” ICBA President and CEO Rebeca Romero Rainey said in an interview with The Hill.
As senators attempt to hash out these policy disagreements, they may be operating on an even shorter timeline than many assume. The House is only in session through July 23, prompting “a desire to try to get this moving before the House goes on recess,” the source familiar with negotiations noted.
Once Congress returns in September, they have about three weeks in session. But “lawmakers will be in full campaign mode and distracted,” Katz noted. They are on recess for nearly all of October ahead of the midterms.
“We suspect that the momentum will shift again at some point in July, and we’ll hear from optimistic lawmakers saying progress is happening,” Katz said.
“We lean slightly toward thinking that the ethics issue is too complicated to overcome in the time left on the clock,” he added. “But fear of the crypto lobby means that Clarity still has a reasonable chance.”
Add as preferred source on Google Tags Angela Alsobrooks Catherine Cortez Masto Dick Durbin Donald Trump Elizabeth Warren Gary Peters Richard Blumenthal Ron Wyden Ruben GallegoCopyright 2026 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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