The US Digital Asset Market Clarity Act (CLARITY) has encountered yet another obstacle in its path through Congress. This time, the dispute centers not on software developers or jurisdictional rivalries between federal regulators, but on the question of ethics provisions — and who should enforce them.

The legislation is aimed at establishing the first comprehensive federal framework for digital asset markets in the United States. Beyond ethics rules, the bill would define the boundary between SEC oversight of digital asset securities and CFTC regulation of digital commodities, while establishing disclosure requirements, market integrity provisions, and anti-money-laundering measures — components that crypto companies have sought as they navigate a landscape of overlapping enforcement actions and conflicting regulatory interpretations.

After months of negotiations that Coinbase chief executive Brian Armstrong described as "thousands of hours of work on both sides," disagreement over a code of conduct for public officials could determine whether CLARITY succeeds or fails.

While there is broad consensus that the United States needs clearer digital asset regulations, negotiators remain split on two fronts: whether the bill's ethics provisions are sufficiently robust, and which authority should be responsible for enforcing them.

Democrats Push for Broader Enforcement Authority

Democrats have expressed concern that the current proposal places too much reliance on the Department of Justice for enforcement. They argue that state attorneys general should have the authority to act if the DOJ does not enforce the law.

In a joint statement issued Wednesday, seven Democratic senators declared that the Republican proposal "falls short." They stated: "Key provisions including those addressing ethics for elected officials, consumer protection, illicit finance, conflicts of interest and market integrity must be strengthened." The statement was published on Senator Ruben Gallego's official website.

Senator Angela Alsobrooks indicated during a Semafor event on Wednesday that negotiators were "fairly close" to an agreement, but she warned that the ethics provisions remained a dealbreaker.

"Although I have been supportive to this point, I absolutely will not support on the floor any legislation that does not include provisions around ethics," the Maryland Democrat said.

Alsobrooks raised concerns not only about the substance of the rules but also about enforcement. "It's an absolute that we cannot completely rely on the DOJ, given what we've seen of their inability and their unwillingness to enforce the law," she said.

The debate has been amplified by President Donald Trump's expanding cryptocurrency business interests, which span meme coins, World Liberty Financial, and other digital asset holdings. According to Fortune, the President's crypto ventures have generated approximately $1.4 billion on paper.

Senator Elizabeth Warren argued that the latest draft "does nothing to stop President Trump from making his next $1.4 billion from crypto," according to a post on Bluesky.

Former SEC official Amanda Fischer similarly contended that the draft would still allow Trump to benefit from existing projects, with only limited restrictions on future crypto income streams.

Despite these objections, Democrats have signaled a willingness to continue negotiations. "We have been working in good faith with our Republican colleagues for the past year and will continue doing so to get this over the finish line," the senators said in their joint statement.

Republicans Advocate for Single Federal Framework

Republicans are pressing to keep enforcement of the ethics provisions under the DOJ, contending that federal rules should be administered through a unified national framework.

Attorney and former Republican Senate candidate John Deaton said Wednesday: "The CLARITY Act is federal legislation... The Department of Justice - not fifty different state AGs with fifty different political incentives and fifty different interpretations - is the appropriate body to enforce federal law."

Senator Bernie Moreno described the draft as containing "the most powerful ethics language in US history," pushing back against claims that the provisions are insufficient.

Patrick Witt, a former White House and Senate counsel, argued that Democratic opposition rests on one of two positions: either that ethics rules without state attorneys general are "meaningless," or that they fail to penalize President Trump for past crypto activity.

"If you hold position (1), then you are basically saying that ALL current federal ethics laws are meaningless because none of them are enforceable by state AGs," he said. "If you hold position (2), then there is literally nothing that can be done to appease you because what you are advocating for is blatantly unconstitutional."

What the Latest Ethics Proposal Would Do

The latest Senate draft, made public Wednesday, would prohibit the president, vice president, members of Congress, and other senior federal officials — along with their spouses — from issuing or sponsoring digital assets while in office.

This restriction would effectively bar future presidential meme coins, preventing token launches similar to Trump 2.0 or Melania 2.0 while the measures are in effect.

The proposal would also prevent cryptocurrency platforms from listing assets issued or sponsored by covered officials. These restrictions would expire in 2029, following the conclusion of President Trump's current term, though covered officials would still be permitted to own cryptocurrencies.

Industry Voices Urge Compromise

Several industry leaders and policy experts argue that even an imperfect bill would be preferable to the regulatory status quo.

Chris Dixon, co-founder of Andreessen Horowitz, compared the current moment to the early internet era, when lawmakers established rules that allowed innovation to flourish rather than forcing new technology into outdated frameworks. While acknowledging that "no law is perfect," Dixon argued the CLARITY Act would deliver long-overdue consumer protections and provide regulatory certainty for blockchain innovation in the United States.

Kristin Smith, former chief executive of the Blockchain Association and now president of the Solana Policy Institute, told Cointelegraph that the latest draft represents a meaningful compromise.

"The new text includes a substantive, one-of-a-kind ethics provision, a necessary step to win the support of Senate Democrats," Smith said. "But ethics is far from the only thing at stake. The Senate has added a full disclosure regime, an entire illicit finance section, and improved spot market regulation."

Smith cautioned that rejecting the bill in pursuit of stronger ethics language could leave lawmakers with no market structure legislation at all. "There is no version of a 'no' vote that produces a stronger bill," she said. "A 'no' vote produces no bill at all: no disclosure regime, no illicit finance protections, no spot market improvements, no ethics provisions, nothing."

Vincent Chok, co-founder and chief executive of stablecoin issuer First Digital, told Cointelegraph that the fact negotiations have narrowed to ethics rather than the broader structure of the bill is itself a sign of progress.

"The core debate is no longer whether digital assets need a regulatory framework, but how to finalize one that commands broad support," Chok said. He noted that while no regulatory framework is likely to be perfect from the outset, businesses can adapt to clear rules that evolve over time, whereas prolonged uncertainty makes long-term investment and product development significantly more difficult.

Salman Banaei, head of public policy at Plume, a blockchain network focused on tokenized real-world assets, also believes a compromise remains possible, though he cautioned that the White House's initial ethics proposal "is not a good starting point."

The outcome carries implications well beyond CLARITY itself. Separate stablecoin legislation has also been advancing through Congress, and together these bills would represent the most significant overhaul of US digital asset policy in history. Whether lawmakers can resolve the ethics dispute will likely signal whether broader crypto legislation remains viable in the current session or stalls until after the next election cycle.

For now, both sides appear to agree on one point: a compromise is still achievable, but its exact form remains the biggest unanswered question.