CLARITY Act's Passage Prospects Dim as Trump's Crypto Conflicts of Interest Become Major Obstacle

On July 24, the long-awaited CLARITY Act, aimed at regulating the digital asset market, faced another setback in the U.S. Congress. Senate Majority Leader John Thune indicated that the bill is unlikely to be voted on before the August recess, leading to a significant decline in market expectations for its passage this year.

Data from Polymarket shows that as of July 24, the probability of the CLARITY Act passing this year is about 37%, down from over 80% in the spring.

The CLARITY Act aims to establish a clear regulatory framework for digital assets and facilitate the integration of crypto assets into the mainstream financial system. While there is some bipartisan consensus on the core aspects of the bill, conflicts of interest related to former President Trump and his family's crypto business have become a major obstacle in legislative negotiations.

Democrats are pushing for stricter ethical provisions to prevent the President and federal officials from profiting from crypto assets. Trump has previously opposed such restrictions, but the Republican stance has shifted recently, with a new draft submitted that includes provisions banning elected officials from profiting from crypto asset transactions.

However, Democrats believe that the new ethical provisions have significant loopholes and fail to effectively address the issue of the Trump family profiting from meme coins and other crypto projects.

Ron Hammond, policy director at crypto firm Wintermute, noted that Senate Democratic Leader Chuck Schumer has recently urged Democrats to focus their political attacks on Trump and related corruption issues ahead of the midterm elections, which may reduce the party's willingness to support the CLARITY Act.

Hammond believes that opponents from the banking and crypto industries have weakened the bill's momentum by delaying the agenda, but he still stated, "The votes are there; it's just that electoral politics have a greater impact."

Analysts point out that even if the CLARITY Act does not pass before the current recess, there remains a window of opportunity before Congress adjourns at the end of the year. However, with important issues like government funding and defense still pending, the bill pushed by the crypto industry may face agenda pressure. As the midterm elections in November approach, changes in the power dynamics of the U.S. Congress may further affect the legislative process for crypto regulation.