- Key insight: Republicans' new text gives state attorneys general enforcement power over bans on federal officials owning crypto interests, but also puts up roadblocks to enforcement and lets federal officials put existing assets into a blind trust.
- Forward look: The package can go up for a procedural vote on Tuesday afternoon.
- What's at stake: The text also makes some changes to the stablecoin yield issue, but the changes are unlikely to lead to support from the banking industry and its allies.
WASHINGTON — The Senate could take a procedural vote on crypto market structure as early as Tuesday afternoon, but it's unclear if the most recent version of the legislation released by Republicans will be enough to win sufficient Democratic support to pass.
Republicans' new CLARITY Act text includes a number of concessions, particularly on ethics and
Republicans need a number of Democrats to sign on to the bill as well as their own entire caucus — including bank-friendly lawmakers on their own side of the aisle — to be fully on board.
The new text, released late Sunday evening, gives state attorneys general the power to enforce ethics provisions — including one barring federal officials, including the president or his spouse, from sponsoring cryptocurrencies, or owning significant crypto interests. It does not, however, require federal officials to fully divest crypto assets, instead allowing officials to move their crypto assets into a blind trust.
"We expect Democrats will focus on the ability to move assets to a blind trust," said TD Cowen analyst Jaret Seiberg in a research note. "This raises questions about whether foreign governments or other interests could still use crypto purchases as a way to curry favor with a President as the President would know that he is benefiting even if he does not control the trust."
The language also requires state attorneys general to show that the U.S. Department of Justice Department not enforcing ethics provisions has caused some economic harm to their state, limiting states' practical ability to enforce the ethics provisions.
Aside from ethics — the biggest hang-up for Democratic moderates in the Senate at the moment — the bill also makes concessions to the banking industry on the
The Treasury secretary could block yield on stablecoins if he or she sees a run on community bank deposits, although the bill doesn't compel the Treasury to act.
Analysts are still skeptical that the bill will ultimately pass into law, especially with so few legislative days left on the calendar. The Senate can pursue a cloture vote at 2:15 pm on Tuesday, moving the bill to 30 hours of floor debate, because it will have been two full legislative days since the package was introduced at that point.
Sen. John Thune, the Senate majority leader, could also look to expedite the bill via unanimous consent, or could withdraw the cloture motion if he wants to avoid a vote.
Ian Katz, managing director at Capital Alpha partners, said that the changes are helpful in getting to 60 votes for cloture, but that might not mean that the bill passes into law.
"I think there are some senators who want to show they're flexible and willing to consider it," he said. "They don't want to be seen as knee-jerk opposing whatever is offered. But I don't think that necessarily translates into a meaningfully better chance that the bill becomes law. It's not hard for senators to vote for it in cloture but then let it die under its own weight, or oppose it in a final vote."
