Trump softens stance, White House advisors remain in their positions; the Clarity bill faces its final showdown in August

Trump softens stance, White House advisors remain in their positions; the Clarity bill faces its final showdown in August.
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Summary:Last week, Trump met with Republican Senators Bernie Moreno and Cynthia Lummis, and White House crypto advisor Patrick Witt to discuss the ethics clause of the CLARITY Act. Trump did not agree to the ethics clause at that time. However, news broke this morning that Trump has agreed to include an ethics clause in the cryptocurrency bill. Furthermore, White House crypto advisor Witt's scheduled military training has been postponed, and he will remain in his position. These two factors have instantly brightened the prospects of the CLARITY Act.

I. Trump Agrees to Include Ethics Clause

The ethics clause has always been considered the final hurdle for the CLARITY Act to gain bipartisan support in the Senate.

Democrats have consistently demanded restrictions on elected officials' involvement in digital asset activities, with their concerns primarily focused on Trump's cryptocurrency investments. Democrats believe that with Trump and his family deeply involved in the cryptocurrency industry, the bill could be seen as "tailor-made" for the president and his business interests if there is a lack of corresponding conflict-of-interest constraints.

According to the president's financial disclosures, his cryptocurrency investment income reached $1.4 billion last year. Senator Elizabeth Warren has also requested Trump to provide updated financial disclosures. Last week, when Trump met with White House officials to discuss the ethics clause of the CLARITY Act, he had not yet agreed to include it. However, this morning, the situation has changed. According to an industry source, Trump has agreed to include an ethics clause in a broader cryptocurrency bill. Another source said the text of the bill could be released as early as Monday evening, but is likely to be delayed until later, adding that the longer the wait, the more likely the bill is to gain bipartisan support. The ethics clause aims to limit the profits that senior officials such as the president, vice president, and members of Congress can make from digital assets during their term of office. The core controversy revolves around Trump's Memecoin and his family company, World Liberty Financial. Although the specific text has not yet been officially released, the focus is mainly on the scope of officials and their immediate family members' involvement in digital asset projects, the methods of holding them, and conflict-of-interest mechanisms. This means that the biggest political obstacle previously hindering the CLARITY Act has been overcome. Since Republicans still need to secure the support of some Democratic senators to cross the 60-vote threshold in the Senate, whether the ethics clause can be accepted by both sides will directly determine whether the bill can complete the legislative process before the August recess. Trump's change of attitude has undoubtedly significantly increased the likelihood of the bill entering the Senate vote in the near future.

II. White House Crypto Advisor Patrick Witte Remains

White House cryptocurrency advisor Patrick Witte's scheduled military training has been postponed, and he will remain in his post. This means that the government's chief negotiator for the CLARITY Act will remain in Washington in the final weeks before the Senate's summer recess. It is worth noting that Witte had previously postponed Georgia Army National Guard JAG training once due to CLARITY Act negotiations. This latest postponement is seen as an important signal that the White House is prioritizing legislation on the cryptocurrency market structure.

Witt confirmed the news in a post on X: "For the past year, I have been working hard to advance the CLARITY Act, realizing President Trump's vision of making America the world's cryptocurrency capital. Last week, it was reported that I was about to travel to the Georgia Army National Guard for mandatory training, just before the CLARITY Act was about to be submitted to the Senate for consideration." While I remain committed to fulfilling my service obligations, I am pleased to report that my training has been postponed, and I will be able to continue this effort to the end. Thank you to @POTUS and @DavidSacks for giving me the opportunity to continue this important work, and thank you to those who contacted me last week. Let's get this done.

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As a key coordinator in the White House's push for digital asset legislation, Witte's continued tenure means that the negotiation window between the executive branch and Congress remains open.

As Witte revises his plans, Harry Jung is preparing to leave the government. Jung, deputy director of the President's Digital Assets Advisory Council, said on July 21 that he would leave in two weeks. It was previously expected that Jung would assume many of Witte's responsibilities during Witte's planned military leave.

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Jung stated that he was proud of the committee's work and called the past two years transformative for U.S. cryptocurrency policy. His departure means the White House will avoid a leadership vacancy, as Witt will remain in office. The committee is currently also working on the implementation of the CLARITY Act, the strategic Bitcoin reserve, and cryptocurrency tax policy.

Witt's continued presence eliminates staffing uncertainty, but the bill's passage still depends on lawmakers' ability to resolve ethical clauses, consumer rules, and other contentious sections. The Senate has not yet announced a final vote, meaning the bill's fate hinges on whether lawmakers can reach an agreement before leaving Washington in August.

III. Why August is a Crucial Timeframe The three weeks before the US Congress's August recess are a critical period for this bill. The US Senate is scheduled to begin its summer recess on August 11 and reconvene in mid-September. However, with the midterm elections approaching in November, members of Congress will return to their states to campaign, resulting in a very tight political schedule, which will be detrimental to legislative debate. Brian Gardner, chief policy strategist at the US investment bank Stifel, believes that "passing this bill in a lame-duck session after the midterm elections is actually very difficult; the congressional agenda itself is the biggest obstacle to this bill." Furthermore, since the Senate is expected to need to pass a procedural vote to conclude the debate, the bill typically requires 60 votes, meaning that in addition to their own votes, Republicans will need to secure the support of at least about seven Democratic senators to move forward smoothly. Summer Mersinger, CEO of the Blockchain Association, predicts that the vote on the CLARITY Act may take place this week. However, ethical clauses, consumer protection rules, and the division of some regulatory powers remain the last few points of contention that both sides need to resolve. Therefore, the final timeline may still be adjusted depending on the progress of the negotiations. Thus, the next two to three weeks will not only determine whether the CLARITY Act can catch the most favorable legislative window in the current Congress, but may also determine whether legislation on the structure of the US cryptocurrency market needs to be postponed until after the midterm elections for re-negotiation. IV. What will the CLARITY Act change? The CLARITY Act is considered the core legislation that will truly determine the direction of the US digital asset industry for the next decade. Once the bill is formally enacted, it will resolve the uncertainty surrounding the regulation of the crypto industry.

1. Clarifying the Regulatory Powers of the SEC and CFTC

The U.S. Securities and Exchange Commission (SEC) believes that most crypto assets are securities and should be regulated under the Securities Act of 1933 and the Securities Exchange Act of 1934; while the U.S. Commodity Futures Trading Commission (CFTC) believes that Bitcoin, Ethereum, and many tokens with commodity attributes are closer to commodities and should be included in its regulatory system.

The CLARITY Act will end this situation: assets that meet decentralized standards and have crypto commodity attributes will be primarily regulated by the CFTC; digital assets that still have securities attributes will continue to be regulated by the SEC. At the same time, the Act also requires the SEC and CFTC to establish a joint coordination mechanism to avoid future regulatory overlap and conflicts of responsibility.

2. DeFi Developer Protection Mechanism

The CLARITY Act, for the first time, addresses the question of whether DeFi protocols should be regulated like traditional financial institutions:

Software developers, node operators, and non-custodial protocols that truly achieve decentralization will not be automatically considered financial intermediaries simply for developing, releasing, or maintaining open-source software; however, if a platform actually controls user assets and provides centralized financial services, it will still bear corresponding regulatory responsibility.

This is one of the most important institutional advancements in developer protection in recent years and a core issue in the long-standing debate on blockchain regulation.

3. Clearer Regulation

In the past few years, almost all large US crypto companies have undergone regulatory investigations.

The SEC has sued Ripple, Coinbase, Kraken, and others, leading many innovative projects to leave the US.

The greatest significance of the CLARITY Act is that it elevates issues reliant on administrative enforcement to explicit legal rules. Whether the Act passes will determine whether the US can move away from a regulatory model that relies heavily on administrative enforcement and towards a regulatory rule system based on congressional legislation.

4. Capital Inflow Due to the clear legal status of crypto assets, pension funds, insurance companies, and funds will be more willing to enter the market. The Senate Banking Committee stated that one of the bill's goals is to establish "clear, enforceable, and consistent rules" for the US digital asset market while protecting consumers. Publicly listed companies such as Coinbase, Robinhood, and Galaxy Digital will also be able to launch more digital asset trading, custody, and institutional service products. Ripple's Chief Revenue Officer, Stuart Alderoty, urged lawmakers to support the CLARITY Act, warning that voting against the cryptocurrency bill would give criminals an opportunity to exploit its loopholes. Coinbase Vice Chairman Ryan VanGrack stated that the bill will establish the first comprehensive federal cryptocurrency framework in the US, strengthen consumer protection, close FTX loopholes, and increase measures to prevent insider trading. V. What Obstacles Remain for the CLARITY Act? While Trump's agreement to include an ethics clause in the bill and the continued tenure of White House cryptocurrency advisor Patrick Witt significantly increase the likelihood of the CLARITY Act's passage, this does not mean the bill is a sure thing. 1. The Ethics Clause Has Not Yet Been Finalized Although Trump agreed to include an ethics clause in the bill, the text has not yet been finalized. In particular, regarding the Trump family's involvement in World Liberty Financial and related digital asset projects, many Democratic lawmakers still believe that simply adding principled restrictions is insufficient to eliminate the risk of conflicts of interest; therefore, the final text may still undergo multiple revisions. 2. Will the Democrats Provide Sufficient Support? The CLARITY Act needs to pass a procedural vote to conclude the debate, requiring 60 votes to proceed to the final vote. Specifically, the Republican Party only has 53 votes. Even if all 53 Republican senators support the CLARITY Act, at least 7 Democratic senators or independent members of the Democratic caucuses would still need to defect. The Democratic Party is not entirely opposed to establishing a regulatory framework for digital assets. Senators Kirsten Gillibrand and Angela Alsobrooks, among others, supported a clearer regulatory system during the stablecoin legislation process. However, some Democratic senators, represented by Elizabeth Warren, have long advocated for strengthening the SEC's regulatory powers and emphasized consumer protection, anti-money laundering, and conflict of interest issues. 3. Time is of the essence. As discussed above, August is a crucial timeframe for the CLARITY Act. According to the current US Congressional schedule, the Senate is expected to begin its summer recess on August 11. After the recess, federal budget negotiations, government appropriations bills, and the midterm election sprint will quickly follow. Missing this crucial window would significantly reduce the priority of the CLARITY Act. If no new progress is made in August, the regulatory ambiguity in the crypto industry will persist. In summary, factors such as Trump's agreement to the ethics clause and Witt's continued tenure are providing positive impetus for the CLARITY Act, making the next three weeks a crucial window for its passage. The CLARITY Act's deeper significance lies in the fact that it may represent a key turning point in the US crypto asset regulation process, moving from an enforcement-driven era to a legislative one.

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