Updated CLARITY Act Would Ban Top U.S. Officials From Crypto Profits, Strengthen Customer Protections
Key Takeaways
- •The revised CLARITY Act would prohibit the president, vice president, members of Congress, federal judges, and their spouses from issuing or sponsoring digital assets for compensation while in office, with the restriction set to expire on January 20, 2029.
- •The bill incorporates bankruptcy protections designed to keep customer digital assets separate from a failed exchange's bankruptcy estate, a response to disputes that emerged after the collapse of FTX.
- •The legislation preserves the Keep Your Coins Act protecting individual self-custody rights, the Blockchain Regulatory Certainty Act shielding non-custodial developers from money transmitter classification, and existing stablecoin yield rules prohibiting interest on idle payment stablecoin balances.
- •A newly added law enforcement section would increase funding for state and local crypto crime investigations, establish training programs for prosecutors, and create a cyber center focused on nation-state threats from actors including North Korea and Iran.
- •Democratic backing remains uncertain as some lawmakers object to concentrating enforcement authority in the Department of Justice without a corresponding role for state attorneys general.
Senate Republicans have released an updated version of the CLARITY Act, a comprehensive digital asset bill that would restrict crypto-related activity by senior U.S. officials while introducing new customer protections, stablecoin rules, and law enforcement measures following major industry failures. The legislation is part of a broader congressional effort to establish a federal framework for digital assets, an area where regulatory jurisdiction between the Securities and Exchange Commission and the Commodity Futures Trading Commission has long been contested.
Ethics Package Targets Officials' Crypto Activity
The revised text emerged after briefing calls with stakeholders and includes ethics language negotiated between the White House and GOP Senators Cynthia Lummis and Bernie Moreno. Democrats have not yet signed off on the language, and bipartisan discussions remain ongoing as the bill advances toward a potential Senate vote.
Under the proposal, the president, vice president, members of Congress, federal judges, and other covered officials would be prohibited from issuing or sponsoring digital assets for compensation while in office. The restriction would extend to spouses and carry a sunset date of January 20, 2029—coinciding with the next presidential inauguration, marking the end of the upcoming term.
Covered officials would also be required to divest crypto holdings, place investments in a blind trust, or do both. The Department of Justice would gain civil enforcement authority over ethics violations, including the ability to bring lawsuits against exchanges that knowingly list prohibited tokens.
Lummis Cites Terra Collapse in Push for Customer Protections
Senator Lummis connected the legislation to customer protection concerns stemming from the collapse of Terra, whose failure she said erased approximately $40 billion, with much of what remained later absorbed through bankruptcy proceedings. Lummis stated that the CLARITY Act establishes a clear distinction between reserve-backed assets and algorithmic products, and that the bill aims to shield customers when platforms fail so that their assets do not become creditors' "first course."
The updated text incorporates bankruptcy protections for digital assets held by exchanges and custodians, designed to keep customer assets separate from a company's bankruptcy estate in the event of failure. The provision could help avert disputes similar to those that arose after the collapse of FTX and other defunct crypto firms. The bill would treat customer assets more like traditional financial assets, preserving ownership with customers.
Stablecoin, Self-Custody, and Developer Provisions Retained
The Blockchain Regulatory Certainty Act remains unchanged from the Senate Banking Committee version. The provision clarifies that non-custodial software developers and blockchain infrastructure providers are not classified as money transmitters solely for building or maintaining decentralized networks.
The Lummis-Grassley amendment also stays in the bill, preserving federal criminal liability for anyone who "knowingly" facilitates unlawful transactions.
The Keep Your Coins Act remains as well, protecting the right of individuals to self-custody their crypto assets without dependence on a third-party platform.
Stablecoin yield rules are likewise unchanged. Companies would be barred from paying interest on idle payment stablecoin balances, though rewards tied to activity, transactions, or staking would remain permissible as long as they do not function like bank deposit interest.
Law Enforcement Section Introduces New Tools
The updated bill adds a dedicated section on crypto-related crime. It would increase funding for state and local investigations and support broader adoption of blockchain analytics tools. The text also establishes new training programs for law enforcement and prosecutors, and creates a cyber center focused on nation-state threats, including those from North Korea and Iran.
A public-private task force would coordinate responses to crypto fraud. Stablecoin issuers would be required to comply with lawful orders to freeze, seize, burn, or reissue tokens when directed.
Democratic Support Remains Uncertain
Democratic backing for the bill remains in question. Some lawmakers object to vesting enforcement authority primarily in the Department of Justice without a corresponding role for state attorneys general. Senator Ruben Gallego previously warned, "You're not going to have the Democratic votes," if ethics rules remain weak.
