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The Senate left town for August recess over the weekend without voting on a cryptocurrency regulation bill, markedly dimming the measure’s chances of passing before the midterm elections.
The crypto industry is remaining hopeful that the Clarity Act, which would create a regulatory framework for the sector, can clear the Senate when lawmakers return for a brief three-week session in September.
But Congress faces a lengthy to-do list when it returns next month, and Senate Republicans and crypto-friendly Democrats have yet to strike an agreement on an ethics provision that remains the central holdup in negotiations.
“I do think the odds drop in September,” Ian Katz, managing partner at Capital Alpha, told The Hill. “You just have a tight window. There aren’t many legislative days. There’s always other issues competing for attention.”
“I don’t think it’s dead yet, but it doesn’t look good,” he added.
The industry and its supporters in Congress have long looked to August as a key deadline to get the Clarity Act across the finish line.
But as other legislative priorities piled up in the final days before recess, Senate Majority Leader John Thune (R-S.D.) announced Thursday that the Clarity Act would head to the floor in September instead.
“The Dems are insistent on no Clarity vote… I worked with sponsors of the bill. @SenLummis [Sen. Cynthia Lummis (R-Wyo.)] was great, and we’re getting that queued up first thing when we come back,” Thune said in a statement shared by press secretary Stacey Daniels on X.
Following the decision to punt the vote, Sen. Thom Tillis (R-N.C.) told reporters Friday that the likelihood “probably drops in half on getting it done.”
Tillis has been a central player in the latest negotiations over the ethics provision. Senate Democrats are pushing for language barring elected officials from profiting off the industry in the face of concerns about President Trump and his family’s various crypto-related ventures.
Late last month, the White House agreed to an ethics provision put forward by Senate Republicans that would ban public officials and their spouses from issuing or sponsoring digital assets, while tasking the Department of Justice (DOJ) with enforcement.
However, it quickly faced pushback from key Democrats, particularly over the enforcement mechanism. They have instead pushed for state attorneys general to hold this role.
Tillis and Sen. Ruben Gallego (D-Ariz.), who chairs the Senate Banking digital assets subcommittee, sent the White House a counteroffer for the ethics provision last week, although it remains unclear whether Trump will accept it.
“President Trump is really the ultimate the decider on this,” Katz noted. “You could have well-intentioned people in both parties who are very motivated to get this through.”
“But if the Democrats come up with something that’s acceptable to them on the ethics provision and Trump just says no, that means this isn’t going to happen or the Democrats just have to completely capitulate,” he added.
In an interview with Punchbowl News released Friday, Trump said he doesn’t mind putting his crypto assets in a blind trust, adding, “I don’t run my stuff anyway. I let my kids run it, and I never talk to them about things … They’re not involved in government.”
This approach would seemingly comply with the White House-approved ethics proposal. But the counteroffer from Tillis and Gallego would reportedly require officials to divest some crypto assets, according to Politico.
When asked Friday about moving the Clarity Act vote to September, Gallego suggested it “gives us more time.”
“Look, at the end of the day, at the least the portion I’ve been working on heavily in terms of the ethics language, we haven’t seen anything come back from the White House,” he told reporters. “They need to take that very seriously.”
Even as Democrats face off with Trump over ethics, Republicans aren’t necessarily all on board with the bill.
Sen. Josh Hawley (R-Mo.) told reporters Wednesday that he still had concerns about the legislation’s impact on community banks. This issue threw a wrench in negotiations earlier this year amid a standoff between the crypto and banking industries.
The banking industry argued that a stablecoin law passed last year left open a loophole that could cause people to shift their deposits out of banks, reducing lending capacity, particularly for community banks.
Senators ultimately reached a bipartisan agreement in May to add new restrictions in the Clarity Act, but the banks continue to argue it falls short.
“I’m open to being persuaded on this,” Hawley said Wednesday, adding, “My farmers in particular, are very, very worried that this will cause massive flight from community banks, and we’ve got to have our community banks.”
Hawley isn’t the only GOP senator pressing for changes to the bill. Sens. Mike Rounds (R-S.D.) and Jerry Moran (R-Kan.) have said they would like to see adjustments, particularly on the stablecoin issue.
“I see that myself as a threat to local lending in a place like Kansas where farmers and ranchers depend upon a local financial institution who has trust and faith in them,” Moran told reporters Friday.
Republican leadership likely didn’t have enough GOP support to move forward with an “effective vote,” noted Christopher Niebuhr, a senior research analyst at Beacon Policy Advisors.
“The assumption for the last two or three weeks was that Thune will go ahead and hold the vote regardless of the bill’s prospects for the purpose of kind of informing industry as to how to spend its dollars this fall,” he told The Hill.
“What you saw here was basically that wouldn’t have been overly helpful to Republicans because they didn’t have even enough Republican support to sort of paint that picture,” he added.
As the industry turns its hopes to the September session, Katz cautioned that the timeline is tight.
“They have three weeks. It’s possible. It’s really difficult though,” he said. “So, it doesn’t look good. But I think basically if this happens it would go down to the wire.”
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