White House compromise clears ethical hurdles, is the Clarity Act hitting the final window before the recess?

Author: Azuma (@azuma_eth)

On July 21, Beijing time, multiple industry sources revealed that the Trump administration has agreed to include an ethics provision in the “Clarity Act” (the Digital Asset Market Structure Bill), with the relevant text now submitted to some Senate Republicans. Although the specific details of the provision have not been fully disclosed, industry participants generally believe that this development could clear the path for an update of the bill text (expected to be released in the coming days) and subsequent Senate votes.

Over the past year, negotiations surrounding the “Clarity Act” have progressed slowly. After parties gradually reached compromises on early disagreements, such as stablecoin yields and DeFi regulation, the remaining major point of contention has been how to address potential conflicts of interest between U.S. government officials and the crypto industry. Now, with the White House signaling a willingness to concede on the ethics provision, the last obstacle that has long hindered the bill’s advancement appears to be on the verge of resolution.

In addition to the progress on the ethics provision, another positive signal for the “Clarity Act’s” passage emerged this morning: Patrick Witt, Executive Director of the White House Digital Asset Advisory Committee responsible for driving the bill forward, has confirmed he will remain in his position to help the bill through its final stretch. Earlier reports had suggested that Witt might leave his post before the “Clarity Act” enters a critical phase in the Senate, due to training obligations with the U.S. Army National Guard, sparking concerns in the industry about the bill’s progress. However, Witt has now confirmed that his training duties will be postponed, allowing him to continue participating in the bill’s advancement.

For the entire cryptocurrency industry, the latest developments may signify that the regulatory tug-of-war, which has lasted nearly a year, has finally reached its most critical turning point.

Content and Significance of the Clarity Act (Skip if familiar)

As one of the core legislative efforts of the Trump administration to establish the U.S. as a “global crypto hub,” the “Clarity Act,” formally titled the “Digital Asset Market Clarity Act of 2025,” aims to create a unified federal regulatory framework for the U.S. digital asset market.

The core objective of the bill is to address the long-standing regulatory ambiguity faced by the U.S. crypto industry over the past few years — to clarify the legal status of different digital assets and redefine the regulatory responsibilities between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Specifically, the Clarity Act seeks to establish a classification system for digital assets, distinguishing them into digital commodities, investment contract assets, and permitted payment stablecoins. Digital commodities with functional attributes of a blockchain network would primarily be regulated by the CFTC; investment contract assets involving funding issuances would remain under the SEC’s purview; and stablecoin issuers would mainly be regulated by banking authorities.

The significance of this framework lies in ending the multi-year jurisdictional struggle between the SEC and CFTC over digital asset regulation, providing the industry with a clearer compliance pathway. In the past, under former SEC Chair Gary Gensler, the SEC tended to classify many digital assets as securities based on the Howey Test, expanding its regulatory scope through enforcement actions. Meanwhile, the CFTC argued that certain highly decentralized digital assets more closely resembled commodities and should fall under its purview. This prolonged boundary conflict between the two agencies kept U.S. crypto companies, trading platforms, and developers in a state of uncertainty.

If the Clarity Act is ultimately passed, the U.S. crypto industry could experience its first comprehensive market structure regulatory framework. In the short term, its impact on the market could be to boost sentiment through improved policy expectations. However, its longer-term significance lies in reducing regulatory uncertainty, providing a more defined institutional foundation for traditional financial institutions and long-term capital to enter the digital asset space.

The Final Disagreement: Ethical Controversy

The path the Clarity Act has taken to reach this point has not been easy. On July 17 last year, the Clarity Act passed the U.S. House of Representatives with a vote of 294 to 134, receiving support well beyond a simple majority. However, unlike the GENIUS Act, which progressed smoothly and was ultimately signed by President Trump, the Clarity Act encountered more complex political maneuvering after moving to the Senate.

Although Republicans hold a majority in the Senate compared to the House, the Clarity Act, as a major regulatory law impacting the entire structure of the digital asset market, still requires a degree of bipartisan support to pass a final vote. This means that the bill faces complex negotiations in the Senate involving regulatory direction, industry interests, and political demands.

Over the past year, disagreements surrounding the Clarity Act have primarily focused on three areas: rules for stablecoin yields, the boundaries of DeFi regulation, and potential conflicts of interest between the Trump administration and the crypto industry. Today, the first two disagreements have gradually cooled as negotiations progressed. On the previously most contentious issue of stablecoin yields, parties have now reached a compromise: “prohibiting earning yields solely from holding stablecoins, but allowing rewards based on actual activities.”

Now, the only issue remaining on the negotiating table is the final point of disagreement: ethical issues. During the past year of negotiations, members of Congress and the White House spent considerable time negotiating ethics provisions aimed at limiting the ability of the President, Vice President, members of Congress, and other federal officials to profit from digital assets while in office (see also: Trump’s “Paycheck” Revealed: $1.4 Billion in Crypto Income, Over 22,000 Stock Trades). With the latest developments this morning, a new breakthrough has emerged in the final political game surrounding the “Clarity Act.”

The More Urgent Issue Than Content Disagreements: Time

However, beyond the disagreements over the bill’s content, an even more pressing issue facing the “Clarity Act” is time. The U.S. Congress typically enters its summer recess in mid-August, leaving only about ten working days for the two parties to finalize the text and push for Senate consideration.

Kristin Smith, CEO of the Blockchain Association, which has played a significant lobbying role in the “Clarity Act” process, stated bluntly yesterday: “This is the most critical moment.”

Smith noted that the “Clarity Act” has come a long way. The current version includes stronger anti-illegal finance provisions, more comprehensive consumer protection measures, and enhanced regulatory requirements for spot trading platforms, making it one of the most comprehensive digital asset market structure frameworks she has ever seen. If both sides can resolve the ethical disputes in the coming weeks, the “Clarity Act” might achieve a key breakthrough before Congress recesses. However, if negotiations stall again, this crypto regulatory framework, which has been in the works for over a year, may have to wait for a new political window.

A Historic Turning Point for Crypto Regulation?

Of course, there is still a final step before the “Clarity Act” truly becomes law. Even though the White House has agreed to accept the ethics provision, uncertainties remain regarding the subsequent release of the text, Senate review, and final coordination between the two parties. However, based on the signals released so far, this digital asset market structure bill, which has been negotiated for over a year, is getting closer and closer to the finish line.

If the “Clarity Act” can achieve a breakthrough before the August 10 recess, it could become an important inflection point in the history of cryptocurrency regulation in the U.S. and globally. Over the past few years, one of the biggest challenges for the global crypto industry has not been a lack of market demand, but the absence of a sufficiently clear, stable, and predictable regulatory framework. Different jurisdictions have vastly different views on the nature of digital assets, the responsibilities of trading platforms, and issuance rules, forcing businesses and capital to constantly navigate evolving regulatory environments to find a path forward.

The significance of the “Clarity Act” lies precisely in its attempt to establish a more defined set of rules for digital assets through legislation. If enacted, this framework could provide an important reference model for global markets. For trading platforms, this means clearer registration and operational pathways; for developers, it means a more predictable innovation environment; and for traditional financial institutions, it means having a more defined compliance basis when entering the digital asset space.

This is not just an upgrade of the U.S.’s own regulatory system; it represents a shift for the global digital asset market from an early stage of regulatory exploration towards a more mature, institutionalized phase of development.

Recommended Reading:

Clarity Act Countdown: 25 Days. What Happens to the Crypto Market If It Fails to Pass Before the August Recess?

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