Democrats Push for Ethics Rules in Crypto Bill as Trump’s Influence Looms

The U.S. Senate's Democratic minority has introduced a detailed regulatory framework for digital assets, positioning it as a counterpoint to the Republican-led Clarity Act and signaling a more cautious approach to crypto market structure legislation. A group of 12 Senate Democrats, including prominent figures such as Ruben Gallego, Mark Warner, and Cory Booker, released the framework on Tuesday, emphasizing the need for a “strong, bipartisan outcome” to govern the nearly $4 trillion global crypto market.

The framework centers on seven key pillars, including regulatory clarity, investor protections, anti-fraud measures, and combating illicit finance. It proposes that the Commodity Futures Trading Commission (CFTC) have exclusive jurisdiction over non-security crypto markets, while the Securities and Exchange Commission (SEC) should integrate digital assets into its existing regulatory framework. The Democrats also advocate for digital asset platforms to be registered as financial institutions under the Bank Secrecy Act, aligning them with anti-money laundering (AML) requirements.

A key aspect of the framework is its focus on ethics and governance. The Democrats have called for a prohibition on elected officials and their families from issuing, endorsing, or profiting from digital assets during their time in office. This provision is seen as a direct response to concerns over President Donald Trump’s growing involvement in the crypto industry, including his family-backed crypto company and personal memecoin project. The senators also emphasize the importance of bipartisan representation in regulatory rulemaking, citing Trump’s recent removal of Democratic commissioners from independent agencies like the SEC and CFTC as a barrier to balanced oversight.

The Republican version of the market structure bill, the Clarity Act, has already passed in the House with broad bipartisan support, receiving 71 Democratic votes. The Senate’s version, meanwhile, has faced limited Democratic backing so far, despite efforts by both parties to build consensus. The Democrats’ framework highlights significant differences with the Republican approach, particularly on DeFi oversight and ethics provisions. While the GOP has pushed for a streamlined, expedited process, the Democrats argue that a durable regulatory framework cannot be rushed.

The current leadership structure at the CFTC further complicates the legislative outlook. The agency is currently led by a single acting chair, Caroline Pham, following the departure of all other commissioners. The Senate is expected to consider Trump’s nominee, Brian Quintenz, to replace Pham, but four additional seats remain unfilled. The absence of Democratic voices on the CFTC and the SEC is a core concern for the pro-crypto Democrats, who stress that a bipartisan process is essential for long-term stability in digital asset markets.

With both parties now circulating detailed legislative frameworks, the path forward hinges on the ability to reconcile differences over ethics, DeFi oversight, and regulatory timelines. The Senate Banking Committee, where the bill is expected to originate, is likely to become a focal point for negotiations. Given the importance of securing at least seven Democratic votes for the bill to pass, the framework’s success will depend on whether the key crypto-friendly Democrats can be convinced to support a final version.