CLARITY Act Hits Roadblock in Congress Amid Trump Crypto Ventures

The Digital Asset Market Clarity (CLARITY) Act, a bipartisan effort to establish a clear regulatory framework for cryptocurrencies in the United States, encountered significant resistance during a June 4 House Financial Services Committee hearing. Democratic lawmakers, led by Rep. Maxine Waters, expressed concerns that President Donald Trump’s involvement in crypto ventures, including World Liberty Financial (WLFI) and the $TRUMP memecoin, could create conflicts of interest and undermine the bill’s objectives. As Congress grapples with regulating the fast-evolving crypto industry, Trump’s business activities have complicated efforts to pass comprehensive legislation.

Regulatory Goals Meet Political Hurdles

Introduced on May 29 by Rep. French Hill, the CLARITY Act aims to streamline digital asset regulation by defining the roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and creating a national licensing system for crypto firms. The bill has attracted bipartisan support, with Democrats like Reps. Angie Craig, Ritchie Torres, and Don Davis are backing it as a way to foster innovation while protecting consumers.

However, during the June 4 hearing, Rep. Waters argued that the bill lacks provisions to prevent high-profile figures like President Trump from exploiting regulatory gaps for personal gain. She called for a “Minority Day Hearing” to further scrutinize Trump’s crypto ties, suggesting the committee could revisit the bill next week. Former CFTC Chair Timothy Massad, a witness at the hearing, described Trump’s crypto activities as a potential “taint” on the industry, raising concerns about national security and foreign influence. “We cannot tell now to what extent the president is doing something because it’s in America’s best interest or because it’s helping promote his personal enrichment,” said Massad. “I think we have to address this. I don’t see how we can move forward and try to create a framework for this industry if we don’t do that.”

Trump’s Crypto Ventures Under Scrutiny

President Trump’s crypto-related activities have drawn significant attention since the launch of World Liberty Financial (WLFI), a platform backed by the Trump family, and its USD1 stablecoin in March. Recently, Trump’s son Donald Trump Jr. posted on X that WLFI is preparing to launch its official crypto wallet.

The $TRUMP memecoin, launched shortly before Trump’s January 2025 inauguration, briefly reached a $8.79 billion market cap but has since declined sharply. Entities affiliated with the Trump Organization, which control 80% of the token’s supply, earned over $324 million in trading fees from January to April, according to Chainalysis. A May 22 dinner hosted by Trump for top $TRUMP token holders at his golf club intensified scrutiny. The event, attended by crypto figures like Justin Sun, included a “VIP tour” and raised questions about political influence through crypto investments. Previous reports indicate that attendees spent an average of $4.8 million on $TRUMP tokens. During the congressional hearing, Warren cited these activities as evidence of potential conflicts, arguing they could compromise fair regulation. Warren described the proposed CLARITY Act as “rushed, overly complicated” and warned that it would increase harm to crypto investors. “Some of the riskiest activities are broadly exempted from the bill, leaving our constituents with no one to turn to when their money vanishes. The bill puts our national security at risk and contains no penalties for crypto criminals.” Warren stated.

Echoes of Past Legislative Challenges

The CLARITY Act faces additional challenges. On June 3, Democratic staff members of the U.S. House of Representatives accused the SEC of withholding critical technical analysis of the CLARITY Act. The staffer further alleged that the SEC shared a standard technical analysis of the bill with Republican staff but withheld it from Democrats, prompting accusations of partisan bias.

Meanwhile, another crypto-related bill, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, is also facing obstacles due to concerns that the Trump family could exploit the legislation to benefit their crypto business. The GENIUS Act passed a key cloture vote in May and is currently under full Senate review for amendments. On June 4, Warren criticized a carveout in the GENIUS Act on X, claiming it exempts crypto wallets from stricter oversight. “The GOP slipped a last-minute carveout for crypto wallets into the GENIUS Act—and now the Trump family is planning to launch one,” Warren posted, vowing to introduce an amendment to close this loophole. She argued that the bill “shouldn’t pass without serious anti-corruption fixes” to prevent potential misuse, particularly in light of reports linking the Trump family to a crypto wallet initiative.

Navigating a Complex Path Forward

With Republicans holding a slim House majority and facing a 60-vote Senate threshold, addressing Democratic concerns will be critical to advancing the CLARITY Act. However, a Democratic staffer indicated that Republicans are unlikely to amend the bill to restrict Trump’s crypto activities, citing constitutional limits on congressional authority.

As President Trump’s second term unfolds, his crypto ventures remain a focal point of contention. The CLARITY Act’s outcome will hinge on whether Congress can balance the need for regulatory clarity with concerns about potential conflicts of interest.