Senate Democrats Raise New Objections to Revised CLARITY Act Draft
Key Takeaways
- •Seven Democratic senators oppose the revised CLARITY Act, citing insufficient provisions on ethics, consumer protection, illicit finance, conflicts of interest, and market integrity.
- •The ethics proposal would prohibit the president, vice president, members of Congress, and federal judges from issuing sponsored digital assets for compensation until January 20, 2029.
- •The revised bill adds a dedicated law enforcement section that increases funding for state and local cryptocurrency investigations and establishes a cyber center targeting threats from North Korea and Iran.
- •The legislation stipulates that customer digital assets would remain customer property in bankruptcy proceedings rather than becoming part of a bankrupt company's estate.
- •Sections including the Blockchain Regulatory Certainty Act, the Lummis-Grassley amendment, the Keep Your Coins Act, and stablecoin yield provisions remain unchanged from the version approved by the Senate Banking Committee in May.
Senate Democrats have raised fresh objections to the updated CLARITY Act, arguing that the revised draft still lacks sufficient safeguards across ethics, consumer protection, and enforcement — complications that could hinder the bill from reaching the 60 votes required for Senate passage. The CLARITY Act is a centerpiece of congressional efforts to establish a federal market-structure framework for digital assets, aiming to clarify the division of regulatory authority between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
According to journalist Eleanor Terrett, Republican senators released the revised legislative text following stakeholder briefings. Democratic senators responded that several sections still need stronger protections, though no specific date for the latest draft's release was provided.
Democrats Target Ethics and Enforcement
Per Terrett's reporting, Senators Angela Alsobrooks, Cory Booker, Catherine Cortez Masto, Ruben Gallego, John Hickenlooper, Mark Warner, and Raphael Warnock have come out against the current proposal. The senators cited inadequate provisions on ethics, consumer protection, illicit finance, conflicts of interest, and market integrity. They noted that negotiations with Republican lawmakers have been ongoing for the past year but emphasized that additional work is needed before the legislation can reach the Senate floor.
Terrett also reported that the updated ethics package emerged from negotiations involving the White House, Senator Cynthia Lummis, and Senator Bernie Moreno. Democrats have not approved that section.
The ethics proposal would prohibit the president, vice president, members of Congress, federal judges, and other covered officials from issuing sponsored digital assets for compensation until January 20, 2029 — a date coinciding with the end of the next presidential term. Covered officials would also be required to either divest their crypto holdings, place them in blind trusts, or both.
Additionally, the proposal grants the Department of Justice civil enforcement authority over ethics violations. However, Democrats object to the exclusion of state attorneys general from the enforcement process, according to Terrett.
BRCA and Stablecoin Rules Remain Unchanged
Several major sections remained unchanged from the version approved by the Senate Banking Committee in May. The Blockchain Regulatory Certainty Act (BRCA) continues to shield non-custodial software developers and blockchain infrastructure providers from being classified as money transmitters.
The Lummis-Grassley amendment also remains intact, preserving federal criminal liability for individuals who knowingly facilitate illicit transactions. Meanwhile, the Keep Your Coins Act upholds individual self-custody rights.
Stablecoin yield provisions likewise stayed the same. Companies are barred from paying interest on idle payment stablecoin balances, though they may offer activity-based rewards that do not function as the equivalent of bank deposit interest.
Law Enforcement and Bankruptcy Protections Expanded
The revised bill introduces a dedicated law enforcement section that increases funding for state and local cryptocurrency investigations and blockchain analytics tools. It also establishes new training programs for investigators and prosecutors.
A cyber center would be created to counter threats from nation-state actors, explicitly naming North Korea and Iran. The bill further establishes a public-private task force to combat crypto fraud. Stablecoin issuers would be required to comply with lawful orders involving token freezes, seizures, burns, and reissuance.
On bankruptcy, the legislation stipulates that customer digital assets would remain customer property rather than becoming part of a bankrupt company's estate — a protection that addresses concerns highlighted by the collapse of major crypto exchanges where customer funds were commingled with corporate assets.
