USDCLARITY Act Faces Final Senate Push Before August Recess
Ethics negotiations, law-enforcement objections and falling passage odds threaten the crypto market-structure bill
TL;DR
- The Senate entered a decisive week for the CLARITY Act without a finalized agreement on government ethics provisions.
- Bernstein warned that failure could pressure crypto valuations but accelerate SEC and CFTC rulemaking.
- Industry groups, law-enforcement organizations and Coinbase intensified competing lobbying efforts before the recess.
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The Digital Asset Market Clarity Act entered a decisive Senate week on August 3, 2026, with lawmakers facing unresolved government ethics negotiations, law-enforcement objections and limited floor time before the chamber’s August recess begins Friday. Senate Majority Leader John Thune said he still expected an initial procedural vote before lawmakers departed, but no vote date had been set.
The CLARITY Act would create the first comprehensive federal market-structure framework for the U.S. cryptocurrency industry. House representatives French Hill and Glenn Thompson introduced the legislation in May 2025 to clarify how regulatory authority over digital assets and market participants would be divided between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
More than a year after its introduction, the bill’s immediate prospects had weakened substantially. Bernstein described the remaining legislative window as the final near-term opportunity to approve what its analysts called “the most consequential crypto market structure bill in U.S. history.”
Senators are expected to shift their attention toward the November midterm elections after returning from recess, reducing the amount of legislative time available for a complex bipartisan package. The bill would first need to clear a procedural vote before the Senate could formally advance it.
White House silence complicates ethics negotiations
The largest unresolved political issue concerns government ethics restrictions related to President Donald Trump’s cryptocurrency interests rather than the proposed division of regulatory authority between the SEC and CFTC.
Senate Democrats have sought stronger provisions covering Trump’s crypto-related financial interests, including the memecoin he launched before Inauguration Day and his family’s involvement with World Liberty Financial. Financial disclosures released in July showed that Trump received millions of dollars connected to World Liberty Financial, intensifying demands for enforceable restrictions covering federal officials’ digital-asset activity.
Republican Senator Thom Tillis and Democratic Senator Ruben Gallego negotiated revised bipartisan ethics language and sent a counterproposal to the White House during the preceding week. The proposal would reportedly allow state attorneys general to sue the Department of Justice when the department fails to enforce ethics laws against federal officials.
Crypto journalist Eleanor Terrett reported Monday, citing a source familiar with the matter, that the White House had not responded to the proposal despite expectations that negotiations could progress over the weekend.
“A deal on the CLARITY Act’s biggest outstanding issue has yet to materialize heading into the week of a potential vote,” Terrett said.
White House officials were separately weighing the counterproposal received the previous Thursday, but lawmakers had not reached an ethics agreement by Monday afternoon. The absence of an agreement left supporters with little time to assemble sufficient bipartisan backing before floor action.
Confidence in passage had fallen sharply across several forecasts and prediction-market assessments. The figures reflected different measurement dates and methodologies but showed a broad deterioration from earlier expectations.
Approximately $3.7 million had been wagered in the referenced prediction market on whether the legislation would become law before the end of the year.
Bernstein warns of valuation pressure
Bernstein analysts led by Gautam Chhugani warned that failure to pass the legislation could produce an immediate negative “industry knee-jerk reaction” across digital-asset markets.
The firm said disappointment could trigger another decline in Bitcoin and broader cryptocurrency valuations because investors had priced in some expectation that Congress would establish a durable federal market-structure framework.
“From a tactical standpoint, we expect the crypto market to bottom and start showing momentum towards late Q3 and early Q4 prior to the mid-terms,” Bernstein analysts wrote.
Bernstein characterized a failure to secure bipartisan passage as “disappointing,” arguing that statutory clarity would give banks, broker-dealers, exchanges and other regulated financial institutions greater confidence to invest in digital-asset infrastructure.
The firm said congressional failure would not necessarily halt U.S. crypto-policy development because the SEC and CFTC could accelerate agency-led rulemaking through Project Crypto.
SEC Chairman Paul Atkins initially announced Project Crypto in July 2025. The effort expanded into a joint SEC-CFTC staff initiative two months later, using the agencies’ existing authority to develop a digital-asset regulatory framework while Congress considered broader legislation.
“Project Crypto could continue to provide strong interpretative releases - Clear taxonomy on tokens, clear rules around DeFi and self-custody,” Bernstein analysts wrote.
Bernstein said the agencies could issue interpretive releases clarifying how different token categories are treated and how securities and commodities rules apply to them. Regulators could also establish clearer treatment for decentralized finance and self-custody.
The analysts said regulators could accelerate an “innovation exemption” allowing qualifying token issuances to remain exempt from securities status for a finite period. They also expected continued regulatory support for tokenized real-world assets, perpetual futures connected to those assets and prediction markets.
CFTC Chair Michael Selig warned during a July interview that regulators would effectively end up “writing all the rules” for cryptocurrency if Congress failed to enact market-structure legislation.
Selig called the existing U.S. framework a “patchwork of state laws and regulations” that is “really bad for business.” He said federal standards were “absolutely critical” for providing regulatory certainty, legal clarity and consumer protection.
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Sheriffs’ group challenges DeFi protections
The National Sheriffs’ Association raised a separate set of objections concerning anti-money laundering, sanctions, know-your-customer requirements and protections for decentralized software developers.
The association represents more than 3,000 sheriffs and 10,000 public-safety officials. During the week preceding the Senate push, it sent a letter to Thune and Senate Minority Leader Chuck Schumer arguing that the bill contained overly broad exclusions from financial-crime requirements.
The organization said the CLARITY Act would exempt decentralized-finance protocols from anti-money laundering rules and argued that every entity operating in the cryptocurrency industry should remain subject to regulation. It said no participant should receive a “blanket exemption” merely because its operations are characterized as decentralized.
The association focused on Section 10604, known as the Blockchain Regulatory Certainty Act. The provision would establish a safe harbor for non-custodial software developers and clarify that developers who do not control customer assets are not money transmitters solely because they create or maintain blockchain software.
The National Sheriffs’ Association asked lawmakers to remove or narrow the provision, arguing that its current language could undermine the application of financial-crime laws.
The Blockchain Association sent its own letter to Thune and Schumer on Monday, disputing the sheriffs’ interpretation and arguing that the legislation would support law enforcement rather than weaken its ability to combat financial crime.
Lindsay Fraser, the Blockchain Association’s chief policy officer, said the bill preserves the distinction between regulated financial intermediation and neutral software development.
“I think because a vote on the Senate floor is in the near future, it’s really important to correct the record on any kind of existing misconceptions about the bill,” Fraser said.
Under that distinction, businesses or individuals controlling customer assets, transactions or protocols could be treated as regulated intermediaries. Developers publishing genuinely non-custodial software would not automatically be classified as money transmitters.
The Blockchain Association argued that protocol operators could not avoid regulation merely by describing their systems as decentralized while continuing to exercise control over the protocol or its financial activity. It also said another section of the bill directs the SEC to begin developing rules for those arrangements.
The organization cited a July letter signed by 160 former law-enforcement and national-intelligence officials who urged Senate leaders to advance the legislation.
“That record forecloses any suggestion that NSA’s interpretation reflects the consensus of the law enforcement community,” the Blockchain Association wrote.
Fraser said the association was attempting to resolve remaining objections so the bill would be ready for floor action once lawmakers reached an ethics agreement.
“This letter symbolizes we’ve been trying to do what we can to help close out all the other existing issues so that when an ethics deal is reached, we’re ready to hit the floor and get as many votes as we can,” Fraser said.
Updated bill spans banking, exchanges and digital assets
U.S. Senator Cynthia Lummis, Republican of Wyoming, released updated CLARITY Act text on July 22, combining work produced by the Senate Banking Committee and Senate Agriculture Committee.
The revised proposal runs 616 pages and divides regulatory responsibilities between the SEC and CFTC. It establishes registration standards for cryptocurrency exchanges, brokers, dealers, custodians and other digital-asset intermediaries.
The legislation includes customer-protection, disclosure and market-oversight requirements designed to bring a wider range of digital-asset activity under federal supervision. Lummis presented the legislation as an opportunity to establish a durable federal regulatory framework.
Banking provisions would authorize regulated financial institutions to conduct specified digital-asset activities. The sections address portfolio margining, regulatory capital treatment and payment-stablecoin balances.
Other provisions cover cybersecurity, illicit finance, bankruptcy protections, software-developer protections, digital-asset kiosks, enforcement training and international regulatory coordination.
The banking industry has opposed parts of the legislation, arguing that the current language could allow cryptocurrency companies to offer yield on stablecoins without being subject to the same requirements imposed on traditional financial institutions.
Coinbase intensifies Senate lobbying
Coinbase CEO Brian Armstrong increased pressure on senators Monday, urging them to approve the legislation during the final week before recess.
Armstrong presented the bill as the result of extensive bipartisan negotiations and argued that passage would support American employment, tax revenue, technological innovation and national competitiveness.
“The CLARITY act represents a ton of bi-partisan work to finally establish clear rules for crypto in America, which 70% of Americans say we should already have,” Armstrong wrote.
Armstrong framed the legislation as a choice between bringing digital-asset businesses under U.S. supervision and allowing more of the industry to move offshore. He argued that it would expand consumer protections, law-enforcement authority and banking opportunities while bringing more cryptocurrency companies inside the American regulatory perimeter.
He previously said the bill had reached the “one-yard line” after years of negotiations among legislators, regulators and industry participants.
“The bill even contains many pages of new authorities for banks to integrate stablecoins and crypto and grow their business, which we strongly support,” Armstrong said.
“This is about America getting back to winning, and remaining strong as a financial and technology hub, to create economic growth, jobs, and tax revenue,” he added.
Armstrong said one in four Americans owns cryptocurrency and argued that voters are twice as likely to support a candidate who backs the CLARITY Act than to oppose one, regardless of party affiliation.
“This week we get to see who in the Senate represents the will of the people, and will step up to vote YES on this common sense legislation,” Armstrong said.
“CLARITY isn’t only a win for crypto users. It’s a win for the future of America as a global leader for finance, innovation, and national security. It delivers on all fronts, and voters know it. Senators should too.”
Stand With Crypto said its supporters had made 950,000 constituent contacts with lawmakers during the campaign. The organization pledged to score every senator’s vote for more than three million advocates, creating a public record of each senator’s position.
SEC Chair Paul Atkins also supported congressional action and offered the agency’s technical assistance during the legislative process. Atkins said legislation enacted by Congress would provide the most durable method for regulating rapidly evolving digital-asset markets while the SEC and CFTC continued developing rules under their existing authority.
The bill entered the final days before recess with substantial support from cryptocurrency companies, regulators and parts of the law-enforcement community, but without a completed ethics agreement. The unresolved White House negotiations, limited Senate floor time and competing arguments over decentralized finance and software-developer protections remained the principal immediate barriers to advancement.
This article has been refined and enhanced by ChatGPT.
