- Key insight: President Trump met with crypto and fintech CEOs at the White House on Wednesday to discuss the path forward for crypto market structure legislation.
- What's at stake: He urged Congress to pass the CLARITY act, although it would be tricky for them to do so ahead of midterms.
- Forward look: Attention could turn to the post-election lame-duck session or the next Congress, where some Democrats might want to tackle the issue, although they're likely to have other priorities, and key disagreements with the White House remain.
WASHINGTON — The crypto bill looks to have stalled out in Congress, even as the White House resumed lobbying for it this week.
President Donald Trump, after meeting with fintech CEOs in the White House on Wednesday, resumed pushing for Congress to vote on the crypto legislation.
"Now we need Congress to take the next step by passing the Clarity Act, a fair version of the CLARITY Act," he said in public remarks, flanked by the CEOs of companies like Kraken, Bitgo and Ripple. "It's very very powerful structured legislation which will keep us ahead of China, keep us ahead of everyone else, and will open the door to the next wave of innovations and innovators."
Congress left for August recess without a vote on the CLARITY package, a sweeping crypto market-structure bill that banks have tracked closely because of provisions in it that would prevent in some cases and allow in others
Democrats want some kind of enforcement mechanism for ethics rules beyond the Department of Justice, which can be directly controlled by the president, and Trump isn't likely to sign something that meaningfully restricts his wealth or ability to earn it.
There are few, increasingly unlikely, paths for crypto legislation to pass this Congress, and a shaky future as to what it could look like after the midterm elections.
The most immediate obstacle is time. Senate Majority Leader John Thune is trying to fit the bill around a calendar crowded with other Republican priorities, including budget reconciliation and voter ID legislation, said Peter Dugas, founder and CEO of Regulatory Intelligence Group. The Senate's failure to advance CLARITY before the summer recess was in large part a reflection of those competing demands, he said.
Even if Thune brings the bill to the floor, a procedural victory would clear only one hurdle. The Senate would still need to approve the legislation, after which the House would likely seek changes rather than accept the Senate package intact, Dugas said. The two chambers would then have to negotiate a final version, potentially reopening some of the issues that have already been settled in the Senate negotiations.
Thune has scheduled a cloture vote for mid-September, which does create some urgency, said Ian Katz, a managing director at Capital Alpha Partners. But a vote there shouldn't be viewed as a firm indication that the legislation is close to passage. Senators who are willing to vote to advance the bill may not necessarily support the final product, he said.
"Some senators will vote for cloture who might not be likely to vote for the final bill," Katz said.
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That distinction is particularly relevant to banks, which have been watching CLARITY for provisions that could determine how traditional financial institutions compete with crypto companies in areas such as stablecoins. The Senate's failure to move the bill leaves those questions unresolved, while a House-Senate negotiation could produce additional changes before the legislation becomes law.
The House could also become a substantially different negotiating partner after the November elections. If Democrats take control of either chamber, lawmakers could face a new set of priorities around crypto regulation, including demands for additional safeguards concerning the president's business interests.
The legislation had appeared to be on a more promising track before the latest impasse. Toward the end of the Biden administration, then-House Financial Services Committee Chairman Patrick McHenry and current ranking member Rep. Maxine Waters, D-Calif., had moved relatively far toward a compromise on crypto-market structure, said Joseph Cox, a partner at Oliver Wyman.
That history could give lawmakers a starting point if they return to the issue after the elections. Cox said a lame-duck session could also offer a window for resolving a bill that is politically difficult but has support from lawmakers who see a need for clearer rules.
Democrats might have an incentive to support a market-structure bill if they are trying to appeal to voters in competitive states, Cox said. Crypto has become a potent political issue, and lawmakers may not want to be identified as hostile to an industry that has demonstrated its willingness to spend heavily in elections.
"It's definitely an issue that is an easy way for purple-state Democrats to show that they are moderate and pro-business and can get to things that just sort of make sense," Cox said. "And I don't think anybody wants to be singled out as the most anti-crypto person and have a fire hose of money at them in primaries, so I could see it possibly happening."
