'No Time to Spare': July Becomes Pivotal for Clarity Act

With Congress in recess until July 13, the push to pass the Clarity Act this year has entered a critical stretch for the digital-asset industry.

Senate Majority Leader John Thune has made the bill a top priority. But the annual defense authorization bill is set to take up the third week of July, just after lawmakers return, leaving a floor vote on the Clarity Act unlikely before the week of July 20.

Several major issues also remain unresolved ahead of any vote. The biggest sticking point is ethics language meant to prevent conflicts of interest.

Democrats want strong provisions to block conflicts tied to former President Donald Trump's crypto businesses. Some Democrats on the Senate Banking Committee have warned they will withdraw support if ethics rules are left out of the final measure. The bill is also facing opposition from law enforcement agencies and civic groups over the Blockchain Regulatory Certainty Act, or BRCA, provision, which they say could undermine efforts to track crimes involving digital assets.

The Senate Banking Committee and the Agriculture Committee also still need to align their approaches. They must reconcile issues including whether federal law should preempt state law and how exchanges should address conflicts of interest. Another potential flashpoint in the final stretch is whether stablecoin issuers should be allowed to pay interest, an issue that has drawn intense lobbying from state banking associations and other groups. If lawmakers want to move the bill before the August recess, behind-the-scenes talks among the White House and both parties are set to intensify around the July 4 holiday.

The crypto industry is divided on the bill's chances. Miles Jennings, general counsel at Andreessen Horowitz, said negotiations tend to come together when time is short and predicted a breakthrough in July. Kristin Smith, chief executive of the Blockchain Association, also expects bipartisan support and a compressed timetable to speed passage.

Alex Thorn, head of research at Galaxy Digital, is more cautious. He cut his estimate for passage this year to 50% from 60%, citing a shrinking legislative calendar and delays in reaching agreement. Still, Thorn said a 50% chance for a major bill was encouraging in itself and that the odds could rise again if clearer signs of agreement emerge.