US Lawmakers Reach Ethics Compromise on CLARITY Act, Offering Potential Path to Senate Vote

Republican and Democratic negotiators have reached a new compromise on the ethics provision for senior government officials, the main sticking point in the CLARITY Act, a US crypto market structure bill.

CoinDesk reported on July 29 that people familiar with the talks said Republican Senator Thom Tillis and Democratic Senator Ruben Gallego have completed an initial revision of language that would restrict senior officials' ties to crypto projects.

The ethics provision has become one of the biggest flashpoints in the CLARITY Act because it is aimed at potential conflicts of interest involving President Donald Trump's crypto businesses. Trump recently agreed to restrictions on senior officials' involvement in crypto ventures. Democrats, however, have argued that the current language would not meaningfully limit Trump's existing crypto businesses. Tillis and Gallego have been negotiating to narrow the gap between the two sides.

The terms of the compromise have not been disclosed. For the CLARITY Act to advance to a Senate vote, the proposal would still need White House approval and backing from a significant number of Democrats.

A breakthrough on the ethics provision could speed negotiations over the broader bill. Time is short, however, with the Senate set to begin its summer recess on Aug. 8. The chamber is also juggling other business, including a Russia sanctions bill and confirmations of federal nominees, leaving limited floor time for the CLARITY Act.

Other unresolved issues include illicit finance rules, protections for decentralized finance, or DeFi, developers, and stablecoin reward programs. The DeFi industry is seeking safeguards to ensure developers are not classified as regulated money transmitters. Some Democratic senators, by contrast, are pushing for stronger anti-illicit-finance measures. The banking industry has also revived concerns about stablecoin rewards. The American Bankers Association, or ABA, and others argue that the current compromise, which restricts interest payments by stablecoin issuers, would not be enough to block indirect reward programs and are seeking additional rules.

As prospects fade for passage before the recess, industry attention is also shifting to September. Coinbase Chief Executive Officer Brian Armstrong said, "Clear rules are almost here," adding, "We're now on the 1-yard line."