Congress Wrestles with Who Should Benefit From Crypto

Why it Matters

The House Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence held a field hearingin New York to examine the Clarity Act, which would replace regulatory enforcement with clear statutory rules for digital assets. The hearing on  Friday, July 17, underscored industry consensus that ambiguity between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) has stalled innovation and driven capital offshore.

Still, Senate Democrats have signaled they will block the legislation without ethics safeguards tied to President Trump's crypto holdings.

The Big Picture

The hearing, titled "Building The Future Of Finance: How The Clarity Act Unlocks Innovation," convened at Federal Hall with four witnesses representing major players in crypto infrastructure and policy. All four agreed the status quo is untenable. Yet the political math in the Senate remains difficult: while two Senate Democrats backed the bill at the committee stage in May, no floor support had been publicly confirmed as of mid-July, and three Democratic senators formally opposed it after key ethics provisions were stripped from a merged draft.

Congress has spent a decade trying to write rules for digital assets. The House passed the Clarity Act a year ago with bipartisan support, establishing a framework that distinguishes between digital assets functioning as securities (SEC jurisdiction) and digital commodities (CFTC oversight). The bill aims to end what witnesses called "regulation by enforcement," a pattern of case-by-case SEC actions that have left companies uncertain whether their products comply with the law.

The Senate version of the Clarity Act is stalled. Sen. Chris Murphy (D-Conn.), Sen. Chris Van Hollen (D-Md.), and Sen. Jeff Merkley (D-Ore.) announced opposition July 14 after a merged draft omitted ethics provisions Democrats had demanded, calling the bill "corrupt" and saying it catered to Trump's business interests. Ethics and anti-corruption advocates convened by Murphy argued Trump needed to be prevented from further profiting from an industry his administration regulates. The bill requires 60 Senate votes to avoid a filibuster.

Political Stakes

The hearing exposed a widening divide between the Republican-controlled House and Senate Democrats. House Republicans, backed by the Trump administration, view the Clarity Act as essential to making the U.S. the center of the digital ecosystem globally. Trump signed executive orders in January 2025 and March 2025 promoting digital financial technology and establishing a Strategic Bitcoin Reserve.

Passage would provide legal certainty and remove barriers to growth. For the administration, it fulfills a campaign priority. For the broader crypto industry, it represents vindication after a decade of regulatory uncertainty drove capital and innovation offshore.

But the stakes are equally high for Democrats. Senate opponents argue the bill allows Trump to profit from an industry his administration regulates. Trump's disclosed 2025 crypto-related income, estimated at roughly $1.4 billion, including holdings tied to World Liberty Financial, has fueled concerns about conflicts of interest. Democrats demanded ethics provisions in the Senate bill to address those concerns; when those provisions were stripped, the three senators announced opposition.

Some crypto industry players have also wavered. Coinbase reversed its January opposition to the Clarity Act after banking compromises reshaped key provisions. That reversal exposed divisions within the industry about whether the bill adequately protects different segments of the market. Early Senate drafts would have flatly banned affiliates of an exchange from trading on it, a provision that drew concern from some quarters.

What's Next

Senate Republicans circulated a near-final draft Wednesday, July 22, that for the first time includes an ethics provision barring the president, vice president, and members of Congress from issuing or sponsoring digital assets, enforced by the Justice Department and set to sunset in 2029. The Senate needs at least 10 Democratic votes to clear the 60-vote threshold, and early reaction was mixed. Sen. Angela Alsobrooks, one of the few Democrats who backed the bill in committee, called the DOJ-enforcement structure "an unserious offer." Sen. John Thune's (R-SD) office has said he intends to move forward with floor action before the chamber leaves for its August recess, with roughly two weeks of session time remaining.

The Bottom Line

What's stalled the bill isn't the substance of market structure, where Republicans and much of the crypto industry have converged, but a fight over who gets to profit from the industry Congress is about to regulate. The ethics provision that emerged this week, complete with a 2029 sunset and Justice Department enforcement, is Senate Republicans' attempt to answer that question without alienating Trump. On the heels of the Senate's August, recess this is close to the last realistic window for the Clarity Act to become law in 2026, and both sides know it.

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