Senate Republicans release updated CLARITY Act with new crypto ethics restrictions

• Senate Republicans released a new draft of the CLARITY Act, adding crypto ethics restrictions targeting public officials and their spouses.
• The updated CLARITY Act faces continued opposition over stablecoin regulation, banking industry concerns and unresolved House-Senate jurisdictional differences.
• Bitunix analyst, Dean Chen, expects year-end passage to be more likely, warning that the ethics agreement alone cannot resolve broader regulatory disputes.

Senate Republicans released an updated version of the Digital Asset Market CLARITY Act on Wednesday following briefing calls with stakeholders. The update adds a package of ethics restrictions targeting digital asset activities by public officials and their spouses.

Senate Republicans add crypto ethics framework to CLARITY Act

The revised legislation comes after negotiations between the White House and Republican senators Cynthia Lummis and Bernie Moreno. However, the new provisions were not supported by Senate Democrats, creating another potential hurdle as lawmakers work to advance the broader crypto market structure bill.

The updated bill contains a dedicated ethics division focused on digital assets. The bill would impose new restrictions on certain digital asset transactions involving covered individuals, including public officials and employees, as well as their spouses.

Under the proposed rules, covered individuals would be prohibited from issuing or sponsoring a digital asset for compensation while serving in office.

The bill directs that a digital asset found to have been issued or sponsored in violation of the restrictions should not be listed for trading on a digital asset intermediary. Covered officials would also be required to sell their crypto holdings and investments in crypto companies or place those assets in a blind trust that they do not control.

However, the ethics provisions would not prevent public officials from discussing digital asset policy or taking official government action on crypto legislation and regulation as part of their duties. It also would not prohibit officials from holding digital assets as investments, subject to existing financial disclosure and conflict-of-interest rules.

Enforcement would fall to the US attorney general, with the bill authorizing civil actions against covered individuals who knowingly and willfully violate the restrictions. Digital asset intermediaries could also face enforcement if they knowingly and willfully list assets issued or sponsored in violation of the proposed rules.

The ethics provisions would also be temporary under the current text. The restrictions are scheduled to sunset at noon on January 20, 2029, although conduct occurring before that date may still be subject to penalties or liability under the law.

Political and regulatory disputes continue to challenge CLARITY Act

Bitunix analyst Dean Chen said the ethics agreement could improve the CLARITY Act's prospects but would not resolve the broader political and regulatory disputes surrounding the legislation.

The analyst pointed to opposition from the banking industry over stablecoin regulation as a key obstacle. Banks continue to seek stricter reserve oversight, asset segregation requirements and clearer separation between stablecoin issuers and traditional financial institutions. He also highlighted divisions among Senate Democrats and unresolved differences between the House and Senate over the regulatory authority of the Federal Reserve and state regulators.

“The ethics agreement is necessary, but it is not sufficient. The real bottleneck has shifted from political ethics to the collision between stablecoin policy and the banking lobby,” Chen told FXStreet.

He also expects passage by year-end to be more likely than a breakthrough during the summer session.