Trump’s Private Interests Derail U.S. CLARITY Act, Case for Institutionalizing Crypto Also Comes Under Scrutiny

Trump Family’s Crypto Profits Ignite Public-Ethics Controversy
Cloture Bid Collapses on Senate Floor Despite Republican Amendment
Questions Mount Over Granting Crypto Assets Institutional Status

The CLARITY Act, a U.S. digital-asset market-structure bill, has failed to clear the threshold required to advance to full Senate consideration. Republicans introduced an amended version incorporating Democratic demands, including public-official ethics provisions, but ultimately failed to secure bipartisan agreement, sharply diminishing the prospects for enactment by year-end. The ostensible point of contention is the conflict-of-interest controversy surrounding President Donald Trump’s family cryptocurrency ventures. Critics, however, argue that the very premise of granting speculative coins institutional status conflicts with the fundamental principles of financial order, particularly when neither the issuers’ obligations nor the underlying assets are clearly defined.

Defeated 49–50, Far Short of 60-Vote Threshold

According to Bloomberg on the 15th (all dates local time), the U.S. Senate held a cloture vote on the CLARITY Act that day, but the measure failed by 49 votes to 50, falling well short of the 60 votes required to bring the bill to the floor. The legislation, which had advanced through the Senate Banking Committee with bipartisan support in May, was thus rejected on the Senate floor. Although the vote does not amount to the definitive rejection or abandonment of the CLARITY Act itself, enactment within the year has become all but unattainable with fewer than two months remaining before the November midterm elections.

The CLARITY Act is primarily designed to grant the U.S. Commodity Futures Trading Commission (CFTC) primary regulatory authority over the digital-asset industry. The U.S. Securities and Exchange Commission (SEC) would retain oversight of investment contracts and tokenized securities, while the CFTC would receive comprehensive new authority over digital-commodity spot markets. The U.S. cryptocurrency industry has spent hundreds of millions of dollars on legislative lobbying over several years in support of the CLARITY Act. President Trump also sought to advance the legislation. Last month, he summoned cryptocurrency-industry executives to the White House in an effort to consolidate support.

Dispute Over Public-Official Ethics Provisions Derails Bill

Conflicts of interest surrounding President Trump’s cryptocurrency ventures and regulations governing stablecoin rewards, however, remained major obstacles to the CLARITY Act until the final stage. Democrats cited the manifest inadequacy of ethics rules governing President Trump’s cryptocurrency business interests as a principal reason for their opposition. The substantial profits amassed by the Trump family in the cryptocurrency market ultimately became a central political issue.

The Trump family holds a controlling interest in cryptocurrency company World Liberty Financial. President Trump reported $1.4 billion in income from related ventures last year alone. The head of an administration directing cryptocurrency policy has simultaneously emerged as a major commercial participant in the market. The GENIUS Act, the stablecoin regulatory law enacted last year, restricts profit-making activities only by federal lawmakers and their families, leaving the president and the president’s family outside the scope of the relevant provision and preserving a pronounced asymmetry in ethics regulation. The decision to invite major holders of the “$TRUMP” meme coin—issued on January 17 last year, three days before his return to office—to a private event attended by the president also blurred the boundary between public office and private enterprise.

Table 1. Key Provisions and Controversies in the Revised U.S. CLARITY Act

Trump’s Blueprint for Cryptocurrency Supremacy

Seeking passage, Republican Senate leaders released a final amended draft of more than 630 pages on the 13th, incorporating revisions demanded by Democrats. Negotiations nevertheless collapsed after Democrats sought stricter enforcement mechanisms requiring the president to divest holdings once they reached a specified threshold. Defections emerged even within Republican ranks. Senator Susan Collins of Maine, who is seeking reelection, and Senator Josh Hawley of Missouri, a longstanding cryptocurrency skeptic, joined the opposition. Even Senator Kirsten Gillibrand, a New York Democrat generally regarded as friendly toward cryptocurrency, ultimately voted against advancing the bill.

President Trump and the Republican Party introduced the CLARITY Act because they concluded that the SEC’s longstanding reliance on litigation and enforcement actions—without clearly defined rules—had exacerbated market uncertainty. The legislation was intended to establish regulatory standards by delineating the respective jurisdictions of the SEC and CFTC in statute. It also sought to prevent blockchain companies, developers and institutional capital from leaving the United States in the absence of a regulatory framework, while creating a legal safe harbor capable of transforming the country into the global center of the cryptocurrency industry. Republicans have argued in particular that the legislation would encourage institutional capital from major banks, pension funds and asset managers to flow more actively into cryptocurrency markets.

Concerns Over Illicit Finance, Deposit Flight and Supervisory Gaps

Experts, however, have repeatedly warned that the CLARITY Act could create significant gaps in anti-money-laundering safeguards. If decentralized finance (DeFi) and self-custodial wallet protocols are broadly exempted from bank-level anti-money-laundering (AML) obligations—or if the scope of those obligations is narrowed—criminal organizations and sanctioned states could exploit them as channels for concealing financial flows. Critics have also argued that placing decentralized mixers, which commingle transaction records to frustrate tracing, within regulatory blind spots could weaken the legal foundations for investigations and sanctions enforcement.

Stablecoin rewards present a further concern. The financial sector warns that permitting interest-like rewards for stablecoin holders could trigger large-scale deposit outflows from small and regional banks. A shrinking deposit base could simultaneously constrain banks’ lending capacity and liquidity. The proposed supervisory structure, under which the CFTC would assume responsibility for a substantial portion of the areas previously overseen by the SEC, is also contentious. Because the CFTC has fewer personnel and a smaller budget than the SEC and has traditionally focused on derivatives-market oversight, critics warn that disclosure requirements and monitoring of unfair trading practices designed to protect retail investors could become less rigorous.

The Pitfalls of Institutionalizing Cryptocurrency

There is also considerable skepticism over whether cryptocurrency markets should be granted institutional status despite these potential side effects. If enacted, the CLARITY Act would rationalize supervisory authority over exchanges and brokers while strengthening the legal basis for prosecuting fraud and market manipulation. In return, the cryptocurrency industry would effectively secure recognition as a government-supervised institutional market. Better Markets, a U.S. financial-reform advocacy organization, has warned that the CLARITY Act could bolster consumer confidence in the industry while furnishing a legal foundation for business models entangled in conflicts of interest. The concern is that even speculative coins lacking both an issuer’s redemption obligation and underlying assets capable of supporting their value could be mistaken for officially sanctioned investment assets.

Some observers therefore argue that the survival of speculative coins should be left to market forces, while institutional regulation should concentrate on stablecoins with clearly defined payment and remittance functions. Because stablecoins are directly connected to dollar-payment networks, their reserve assets and redemption capacity require public oversight. The Brookings Institution, a U.S. think tank, has assessed that stablecoins supported by adequate reserves and redemption capacity could facilitate round-the-clock payments and reduce the cost of cross-border remittances. A supervisory foundation is already in place under the GENIUS Act, which imposes one-to-one reserve requirements, monthly disclosures and redemption obligations on issuers. The implication is that a selective approach is required—leaving speculative coins to the market’s self-correcting mechanisms while first bringing stablecoins with demonstrable real-economy demand within a comprehensive regulatory framework.