Senate Republicans Release Merged CLARITY Act Text With New Ethics Section

Senate Republicans released an updated text of the Digital Asset Market Clarity Act on Wednesday, July 22. The draft merges the versions advanced by the Senate Banking and Agriculture Committees into a single bill and adds a new ethics section that would bar federal officials, including the president, from issuing or sponsoring a digital asset for consideration.

Later the same day, seven Senate Democrats said the text "falls short." They are the group whose votes the bill needs to clear the Senate's 60-vote threshold.

Senate Banking Digital Assets Subcommittee Chair Cynthia Lummis published the text alongside a section-by-section summary and eight fact sheets. The bill carries the House number H.R. 3633. The Crypto Times, which reviewed the merged draft, put it at 616 pages across 104 sections.

What the merged text keeps

The core market structure is unchanged from the version the Banking Committee approved in May by a 15 to 9 vote. That includes the classification of digital assets and the division of supervisory responsibility between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Section 604 still contains the Blockchain Regulatory Certainty Act, which shields non-custodial software developers from registration as money transmitters and from Bank Secrecy Act obligations. The Keep Your Coins Act, which preserves the right to self-custody, also remains in the text.

Section 404 keeps the negotiated limit on stablecoin yield: firms may not pay interest on idle stablecoin balances. Rewards for activities such as staking remain permitted where they are clearly distinguishable from interest on a bank deposit.

Banking trade associations said in a statement that the new draft "still puts at risk the local lending that drives economic activity in the U.S.," while acknowledging senators' willingness to consider targeted changes.

The ethics section

The ethics language was negotiated between the White House and Republican senators, chiefly Lummis and Bernie Moreno. It sits in a new Division 30 of the bill. According to the one-pager published by Lummis, the section works as follows.

Section 30101 creates a new 5 U.S.C. §13152 that prohibits any "covered individual," defined as any public official or employee and their spouse, from issuing or sponsoring a digital asset in exchange for consideration. The definition names the president, the vice president, members of Congress and federal judges. Lummis told CoinDesk the judicial coverage runs to district courts, appeals courts, the Supreme Court and the Court of International Trade.

Enforcement runs through the Department of Justice. A new 5 U.S.C. §13153 directs the attorney general to bring civil enforcement actions against covered individuals who knowingly and willfully violate the ban, and against digital asset intermediaries that knowingly list a violating token.

The penalties are set out in the same section. An intermediary faces a civil penalty of up to 250,000 Dollar per violation, per day. A covered individual who violates the ban must disgorge all profits and pay a penalty equal to 10 percent of the consideration received or 500,000 Dollar.

Section 30102 updates federal financial disclosure law so that digital assets sold for remuneration and worth more than 1,000 Dollar must be reported, closing a gap in the current requirements.

Sections 30103 and 30104 govern timing. The ethics provisions take effect on the earlier of 360 days after enactment or 60 days after the final implementing rule. The Government Accountability Office is required to report within 360 days on how to keep federal ethics law current as digital asset rules develop.

Section 30105 sets the end date. The ban has no force or effect on and after noon on January 20, 2029, which is the end of the current presidential term. The one-pager frames this as evidence that the standard is one the president chose rather than one Congress imposed.

Officials who already hold an interest in a previously issued or sponsored digital asset can come into compliance through divestment or a qualified blind trust under existing ethics procedures. The one-pager also states that nothing in the section limits existing conflict-of-interest law, anti-fraud authority under the Commodity Exchange Act, securities law or campaign finance law.

Why state attorneys general are not in it

Lummis told CoinDesk that Republican negotiators and Democrats had worked "for weeks on end" but reached an impasse over whether state attorneys general could bring criminal or private cases against parties bound by the ethics section.

"That was a bright red line for a lot of U.S. senators who did not want to subject themselves to being sued by a different state attorney general," Lummis said. "That was also true of the White House, which has been subject to multiple lawsuits and prosecutions by state attorneys general."

Under the current text, states may instead sue crypto exchanges that list assets which would violate the provision.

Customer assets, illicit finance and law enforcement

The merged draft expands the sections on consumer and bankruptcy protection. Digital commodity exchanges, brokers and dealers must segregate customer assets, and platforms are barred from treating customer funds as their own property. Customer digital assets are not to fall into a bankrupt firm's estate but stay assigned to the customer, in the manner of other assets held in trust.

On illicit finance, the text addresses the Bank Secrecy Act, anti-money-laundering protections and sanctions coverage for exchanges and decentralized finance. Lummis said several additions came at the request of law enforcement, including a provision on crypto ATM fraud and a safe harbor allowing platforms to freeze funds they suspect are tied to suspicious transactions while cooperating with law enforcement.

The draft also adds new funding, powers, blockchain analytics tools and training programs for law enforcement agencies, and would create a Cyber Innovation Center focused on state-backed cyber threats and misuse of digital assets. Regulated stablecoin issuers would be required to carry out lawful court or agency orders, such as freezing or seizing tokens.

Separately, the text contains a "sense of Congress" that at least two commissioners at each of the SEC and the CFTC be nominated in consultation with the minority party. Neither agency currently has a Democratic commissioner.

The Democratic response

The seven senators who signed Wednesday's statement are Catherine Cortez Masto of Nevada, Angela Alsobrooks of Maryland, Cory Booker of New Jersey, Ruben Gallego of Arizona, John Hickenlooper of Colorado, Mark Warner of Virginia and Raphael Warnock of Georgia.

"The Republican-proposed text of the CLARITY Act as it currently stands falls short," they wrote. "Key provisions including those addressing ethics for elected officials, consumer protection, illicit finance, conflicts of interest and market integrity must be strengthened. We have been working in good faith with our Republican colleagues for the past year and will continue doing so to get this over the finish line."

Alsobrooks and Gallego were the only two Democrats to vote the bill out of the Banking Committee in May. Alsobrooks was specific about the enforcement mechanism before the text was published: "This DOJ enforcing an ethics provision? That's an unserious offer, and I wouldn't support the bill if that's the language. But we'll keep working from that floor to reach an agreement that holds us all accountable."

Booker objected to the process as well as the substance. "The new Clarity text is a Republican text," he said. "There's only one way to get there, which is a bipartisan pathway." Democrats were not party to the White House negotiations and had not seen the draft when it was finalized.

Senator Elizabeth Warren, the ranking Democrat on the Banking Committee, went further and said the bill "should be dead on arrival," citing investor protection, national security and the president's crypto ties.

The Republican and industry response

Moreno called the language "the most powerful ethics language in U.S. history." A White House official told CoinDesk on Monday that President Donald Trump had "agreed to the most comprehensive and wide-ranging ethics provision in history."

Lummis said in her release that the coming weeks "are likely the last real chance we will have for years to get this right," thanked Democratic colleagues for their contributions and committed to reaching a deal. She told CoinDesk the updated text is not likely to be the final version and that the ethics and illicit finance provisions would be discussed further through the weekend.

Digital Chamber CEO Cody Carbone called the draft "a meaningful step toward the Senate vote on the Clarity Act we've been calling for." Miller Whitehouse-Levine of the Solana Policy Institute pointed to the treatment of tokens and token fundraising, exchange regulation and the pathway for tokenized securities and futures markets.

Trump's disclosure and what the section covers

Trump's 2025 financial disclosure showed crypto-related income that CoinDesk initially reported as more than 1 billion Dollar and later put at 1.4 billion Dollar, a figure The Crypto Times also used. His crypto business ties include a memecoin company issuing a coin named for him and a stablecoin issuer.

By the text's own timing rules, the ban applies only to conduct occurring after the ethics provisions take effect. Section 30105 ends the ban at noon on January 20, 2029 and provides that no person may be held liable or penalised for a violation of Section 30101 after that point.

The calendar and the arithmetic

Majority Leader John Thune's office told CoinDesk he intends to move to floor action in the coming days. The Senate leaves Washington on August 7 for its summer recess, and lawmakers have widely treated that date as the last realistic window for the bill this year, with the post-recess calendar filling with midterm politics.

The bill needs 60 votes to invoke cloture. The number of Democratic votes required is disputed. Reporting places the Republican count at 52 or 53 seats following the death of Senator Lindsey Graham, which puts the requirement at seven or eight crossovers if every Republican votes yes. CoinDesk put the figure at at least 10, and other assessments reach the same number by accounting for Senators Josh Hawley and Rand Paul, who both opposed the GENIUS Act, and for Senator Mitch McConnell's absence. Lummis noted that part of the Senate would be away next week for Graham's funeral.

Under any of those counts, the seven senators who signed Wednesday's statement are not a group that can be worked around.

Market reaction

On the Polymarket prediction market, the implied probability that the Clarity Act is signed into law in 2026 fell from 46 percent to 38 percent after the Democrats' statement, CoinDesk reported early on July 23. Bitcoin traded near 65,500 Dollar at the time, under pressure from rising oil prices and Treasury yields as well as the regulatory news.