WASHINGTON — Senate Republicans have released the latest text of their landmark cryptocurrency legislation, introducing a highly anticipated ethics agreement negotiated with the White House. However, as reported by American Banker, the new language has immediately run into opposition from key congressional Democrats, threatening the bill’s prospects of passing before the upcoming August recess.
The newly added ethics provision is designed to secure bipartisan support by banning all elected federal officials, including the president, from issuing digital assets. However, the mechanism for enforcing this ban has emerged as a major point of contention. Under the Republican draft, enforcement power is granted exclusively to the federal Department of Justice (DOJ). Senate Democrats, led by influential figures such as Senator Ruben Gallego (D-Ariz.) and Senator Angela Alsobrooks (D-Md.), argue this structure represents a dangerous loophole. They contend that because the president maintains the authority to dismiss the Attorney General, a sitting president could easily block any DOJ investigation into their own digital asset activities.
To resolve this conflict and ensure independent oversight, Democratic negotiators had proposed transferring enforcement authority to state attorneys general, a measure Republicans excluded from the final text. Additionally, the ethics provision is scheduled to sunset on January 20, 2029, further complicating long-term regulatory certainty and raising questions about its effectiveness under future administrations.
The revised draft, known as the CLARITY legislation, also disappointed the traditional banking sector. The bill leaves the contentious stablecoin yield provisions unchanged from the version previously approved by the Senate Banking Committee. Representatives of the banking industry had lobbied heavily for the inclusion of “circuit breaker” provisions. These mechanisms would have automatically suspended interest payments on stablecoins if rapid capital migration threatened to trigger massive deposit flight from traditional financial institutions.
However, Senate Banking Committee Chairman Tim Scott (R-S.C.) blocked votes on the banking industry’s proposed amendments during the committee markup. While behind-the-scenes negotiations are expected to continue over the next two weeks, legislative analysts note that the window for securing a bipartisan compromise before Congress recesses in August is rapidly closing. Traditional banks must now navigate a regulatory framework that fails to address their primary competitive concerns regarding stablecoin yields.