The CLARITY Act Enters a New Phase: From "Will It Pass" to "What Will It Contain" — the Ethics Battle and the August 7 Deadline

The Terms of the Debate Have Shifted

Delia Rojo, US market research analyst at XWIN, notes in her San Francisco dispatch that the debate around the CLARITY Act has changed in kind. Until a few weeks ago the market's central question was when the bill would pass; the focus now is what it will contain when it does. Crucially, the simple partisan frame of Democrats opposed and Republicans in favour has broken down. Even crypto-supportive Democratic lawmakers back the bill in principle while insisting the current text needs amendment. The SEC, the CFTC, the Treasury and both parties broadly agree that a market structure law is necessary; the disagreement is confined to the content of the rules. Rojo reads the shift from "how do we regulate crypto" a few years ago to "what rules should grow this market" today as evidence of a maturing asset class.

The Three Amendments Democrats Are Demanding

Democrats are pressing three points. First, ethics. They want strict conflict-of-interest rules preventing the president, senior officials, and members of Congress and their families from profiting improperly from digital asset ventures — a demand rooted in President Trump's own crypto involvements and the principle that those who write the rules must not profit from them. Second, illicit finance: mechanisms against money laundering, sanctions evasion and terrorist financing built into the statute itself, going beyond the industry's existing AML and KYC practice. Third, consumer protection, where both parties accept the need but differ on intensity.

The negotiations themselves are tense. On July 22, Republican Senator Cynthia Lummis released a revised draft containing an ethics clause banning federal officials, including the president, from issuing or sponsoring digital assets for profit. Reports had earlier indicated President Trump approved the inclusion of ethics provisions. Yet the same day, seven Democratic senators — Alsobrooks, Booker, Cortez Masto, Gallego, Hickenlooper, Warner and Warnock — issued a joint statement criticising the revised draft as falling short on official ethics, consumer protection, illicit finance, conflicts of interest and market integrity. These seven are the core negotiators whose votes are likely needed to advance the bill, and two of them voted for it in committee. Senator Elizabeth Warren went further, dismissing the revised ethics language as hollow and calling for the draft to be scrapped. Notably, however, the seven did not walk away: they committed to continuing talks with Republican counterparts.

The 60-Vote Wall and the Risk of Running Out of Time

Under regular Senate procedure, 60 votes are needed to end debate, which Republicans cannot supply alone. Even with all 53 Republican seats, at least seven Democratic-caucus votes are required, and the sudden death of Senator Lindsey Graham on July 11 added uncertainty to the Republican count itself. With the Senate leaving for recess after August 7, time is extremely short. Galaxy Research cut its probability of 2026 enactment to 30%, and Polymarket's odds of a presidential signature this year slipped into the low 40s. Law enforcement is split: the Fraternal Order of Police supports the bill, while groups including the National Sheriffs' Association warn that its DeFi provisions could create loopholes in anti-money-laundering oversight. Rojo argues the delay of a few weeks matters little; what matters is that the US is holding to its course of building digital assets into formal financial infrastructure. She flags four things to watch: how far the parties compromise on ethics, how illicit finance measures are written into the text, when the floor vote is formally scheduled, and how the SEC-CFTC division of labour is resolved.

Implications for Japan

This is not a purely American story. The EU's MiCA regulation reached full enforcement across all 27 member states on July 1, 2026, and licensing regimes are advancing in Singapore, Hong Kong and Abu Dhabi. In Japan, the amended Financial Instruments and Exchange Act passed on July 15, moving digital assets under the FIEA. How the US market structure law ultimately lands will serve as a reference point for Japan's own debates on crypto ETFs, RWA, DeFi and on-chain finance. The CLARITY Act sits at the centre of global digital asset rulemaking.

Business Development Insights

1. The phase of anticipating content, not passage, has begun. The practical question is now at what level ethics, illicit finance and consumer protection provisions will be codified. Illicit finance rules in particular directly expand demand for compliance technology: AML/KYC, transaction monitoring and sanctions screening. Japanese firms with tools or services in this domain should treat US codification as a market-expansion event and begin building US partnerships before the final text settles.
2. Regulatory readiness is itself becoming a competitive moat. With the CLARITY Act, MiCA and Japan's amended FIEA, the major jurisdictions' regimes will be in place across 2026–2027. The gap between operators who can comply across multiple jurisdictions simultaneously and those who cannot will widen, in both licensing speed and institutional trust. As BitMEX's exit demonstrated, mid-sized players unable to carry regulatory costs get culled. In partnership and investment decisions, a counterparty's regulatory maturity deserves equal weight with its technology.
3. Information planning must account for the structure of political risk. The core conflict here is neither technological nor market-driven but a singular political factor: the president's own crypto ventures. The bill's fate can therefore be decided by the political calendar — the August recess, the November midterms — independent of industry merit. Japanese firms weighing US expansion should plan against both an enactment scenario and a slip to 2027 or beyond, and design operations that function under the current no-statute baseline of SEC and CFTC enforcement policy.

Sources

1. NADA NEWS, "The CLARITY Act Enters a New Phase: What Amendments Are Democrats Demanding? [San Francisco Report]" https://www.nadanews.com/360892/
2. CoinDesk, "Key Democratic lawmakers say crypto Clarity Act 'falls short' on ethics, other issues" https://www.coindesk.com/policy/2026/07/22/key-democratic-lawmakers-say-crypto-clarity-act-falls-short-on-ethics-other-issues
3. CNBC, "Senate crypto bill would ban federal officials from issuing digital assets" https://www.cnbc.com/2026/07/22/senate-crypto-bill-would-ban-federal-officials-from-issuing-digital-assets.html
4. Forbes, "Senate Unveils New Clarity Act Text As Ethics Deal Sparks Fresh Debate" https://www.forbes.com/sites/digital-assets/2026/07/24/mixed-reactions-to-new-crypto-clarity-act-text--ethics-clause/
5. PYMNTS, "Clarity Act Supporters Add Ethics Rules for Officials to Save Senate Bill" https://www.pymnts.com/cryptocurrency/2026/clarity-act-supporters-add-ethics-rules-for-officials-to-save-senate-bill/
6. bloomingbit, "CLARITY Act Vote Count in Flux: Two GOP Votes Uncertain, 7–9 Democratic Votes the Focus" https://jp.bloomingbit.io/feed/news/116373
7. BitTimes, "Warren Calls Ethics Provisions 'Hollow', Demands the CLARITY Draft Be Scrapped" https://bittimes.net/news/225894.html
8. CoinPost, "Probability of CLARITY Act Enactment This Year Falls to 30% — Galaxy Research" https://coinpost.jp/?p=727266
9. CoinPost, "Seven Democratic Senators Oppose Senate CLARITY Draft; Fraternal Order of Police Supports" https://coinpost.jp/?p=727262
10. Tech Times, "White House Claims Historic CLARITY Act Ethics Deal; Democrats Haven't Seen It" https://www.techtimes.com/articles/321254/20260722/white-house-claims-historic-clarity-act-ethics-deal-democrats-havent-seen-it.htm
11. CRYPTO TIMES, "Storm Clouds Over the CLARITY Act: Seven Democrats Refuse to Back It, 60 Votes in Doubt" https://crypto-times.jp/news-storm-clouds-gather-over-clarity-bill-seven-democratic-lawmakers-refuse-to-back-it/