Melker Bengtsson
TL;DR
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Senate Republicans released what they call the final version of the CLARITY Act, two days before the cloture vote
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The White House has made concessions in the ethics provision: state attorneys general get power to bring civil suits
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Officials, judges, and their spouses must divest substantial crypto holdings or place them in a blind trust
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60 votes are needed; so far no Democrats have responded to the new version
The White House has made concessions in the ethics provision of the CLARITY Act, and more. Last night, Senate Republicans released what they call the final version of the bill. Since the exact wording in the ethics provision was released, it has remained unchanged. Until now. This marks a real change in negotiations. The final version comes just two days before the cloture vote is set to happen.
Senator Cynthia Lummis, the Republican Senator from Wyoming and chief negotiator on the bill, released the new version together with agriculture chair John Boozman and banking chair Tim Scott. Lummis commented on the new version:
After a year of intense daily bipartisan negotiations, this bill is ready. President Trump voluntarily agreed to unprecedented ethics restrictions, holding every federally elected official, judge, and their spouses to some of the toughest ethics restrictions in U.S. history.
The ethics provision of the CLARITY Act has been the main point of friction all summer. Both sides of the aisle pretty much agree on the fact that a market structure act is needed and the overall wording of the current act. But who’s got jurisdiction, that’s been hard to agree on.
Republicans and the White House want the Attorney General, Democrats want state attorneys general. In late July, the Tillis-Gallego proposal was presented. Back then, the White House response came back “blank”, according to Ruben Gallego. Now, Senator Lummis says essentially all of it has been implemented.
State Attorneys General Get Enforcement Power
There are two major changes to the ethics provision: first, officials, judges, and their spouses must either divest or place into a blind trust, substantial crypto holdings. Second, state attorneys general get power to bring civil suits against those who issue, sponsor or hold crypto illegally as well as against exchanges that list assets in violation.
Because of President Trump's substantial, private crypto holdings and interests, this has been a major point of contention for Democrats.
Additionally, the floor amount on the amount involved in the transgression has been increased from a 10% cap to a 20% floor. A substantial increase. The sunset date in 2029 has been deleted altogether.
These changes to the bill come only a few days after it went through a first round of substantial changes last week. 114 changes were made up until then, the changes last night bring the total tally to 126. And it’s not all in the ethics.
Treasury Gets New Power to Protect Community Banks
The other changes aim to accommodate other points of specific Democratic and even Republican Senators, as well as community banks. The community banks, via their joint associations, released a letter last week once again criticizing the stablecoin rewards section of the bill. According to Crypto In America journalist Eleanore Terrett, this section has also been changed.
To further accommodate the community banks, a new Treasury power has been introduced. It’ll allow the Treasury to intervene against deposit flight from community banks to stablecoins. These smaller banks lend to mortgages, agriculture and more, and the worry has been that stablecoin rewards would directly compete with depositing.
Nine Democratic Votes Needed
60 votes are needed to get to debate. Republicans currently hold 53 seats and expect at least two defections. That would require nine Democratic votes. So far no Democrats have responded to the new version.
Banks and financial institutions came out in overwhelming support. Goldman Sachs, BlackRock, Fidelity and more all urged the Senate to pass. So did Ripple’s founder and Democratic megadonor Chris Larsen. Two national sheriffs associations dropped their opposition.
After spending the summer digging their heels in, saying the ethics provision was set in stone, Republicans have now started negotiating. With President Trump’s blessing. It shows the urgency with which they want this passed. Missing this vote would very likely push the bill into next year, considering midterm elections. Senator Lummis has even said not this decade, if it doesn’t pass now.
The United States aims to be the world leader on crypto. But, while other countries and the European Union all have market structure regulations already in place, the US is lagging. Hopefully, the accommodations made both in the ethics provision and in the bill itself will convince some.
