CLARITY Act Hits Make-or-Break Week in Senate Amid Ethics Dispute

The CLARITY Act, a bipartisan bill aimed at bringing clarity to regulating the crypto industry, faces a make-or-break week in the Senate. The bill's progress is stalled due to an ethics dispute over provisions that would prohibit federal officials from issuing or sponsoring digital materials, with enforcement left solely to the Department of Justice (DOJ). This issue has been ongoing since late July, when Senate Republicans floated these ethics provisions.

Coinbase CEO Brian Armstrong has been a vocal supporter of the bill, describing it as 'a ton of bipartisan work' and stating that '70% of Americans' want clear crypto rules. He also noted that the bill includes new authorities for banks to integrate stablecoins and crypto.

The current standoff is between Senate Republicans and Democrats over how to enforce the ethics rules. Democrats are looking for a way to allow state attorneys general to challenge DOJ inaction, similar to the mechanism modeled on the Laken Riley Act. The White House has yet to respond to a bipartisan compromise proposal from Senators Thom Tillis and Ruben Gallego.

With the bill still not on the Senate floor schedule, lawmakers face a narrowing window to advance legislation that would establish long-awaited rules for digital asset markets. If cloture is filed on Wednesday, the earliest vote would be Friday, leaving virtually no time before the August 10 recess.