Crypto Bills Chaos in Congress, CLARITY Act Likely Dead

Crypto Week in Congress, initially planned as a legislative bonanza, turned chaotic due to unexpected tensions, particularly between right-wing Republicans and their party's leadership. The week's events nearly derailed the House's plans to pass multiple crypto bills, significantly damaging crypto's legislative goals, according to policy leaders.

The House's market structure bill, the CLARITY Act, has likely been irreparably damaged, while a stablecoin bill, the GENIUS Act, is poised to pass. The chaos was sparked by a combination of factors, including ongoing angst from President Donald Trump's MAGA base over the Jeffrey Epstein scandal and concerns over a federally issued central bank digital currency (CBDC).

Republican leadership anticipated pushback from Democrats over President Trump’s personal crypto ventures, but the true threat emerged from the MAGA flank of the GOP. Right-wing protests over the digital asset bills continued to grow, leading Democrats, even those pro-crypto, to abandon the legislation due to left-wing critiques.

Signs of trouble first emerged on Tuesday when 12 Republican hardliners tanked a procedural vote that would have allowed three crypto bills to move towards final floor votes. President Trump then summoned the holdout Republicans to the White House, promising to add language banning CBDCs to the CLARITY Act in exchange for their support. However, this deal quickly dissolved the next day.

Rep. Marjorie Taylor Greene, typically an ardent Trump supporter, compared the GENIUS Act to “the mark of the beast,” a biblical symbol associated with the Antichrist. Republicans have long opposed the idea of a federal digital dollar, citing concerns over financial privacy. Other countries, such as China, have already rolled out CBDCs, which allow governments to monitor financial transactions more closely.

The Epstein scandal also played a significant role in the crypto-related House Republican tailspin. President Trump faced increasing criticism for his administration’s handling of the fallout over Epstein. Many MAGA Republicans, including Greene, pushed back on the Department of Justice's conclusion that a list of Epstein’s clients did not exist.

On Wednesday, a re-do of the failed procedural vote on the House’s three crypto bills blew up in even more theatrical fashion. House Republican leadership refused to greenlight the addition of anti-CBDC language in the CLARITY Act, leading Republican hardliners to reject the re-do procedural vote.

House Republicans rejected the demands for anti-CBDC language because it would derail support for CLARITY among pro-crypto Democrats, whose votes were needed to give the legislation enough momentum to succeed in the Senate. Pro-crypto Democrats had already begun fleeing from the legislation, citing a refusal of House Republicans to consider tweaks to language in the bill regarding regulating fraud and crime in the DeFi space.

Rep. Sam Liccardo, a pro-crypto Democrat representing much of Silicon Valley, could no longer support CLARITY given Republicans’ refusal to add “a very modest approach to self-regulation” for DeFi to the bill. Liccardo expressed concern that more and more crypto activity is flowing to DeFi protocols, where the majority of fraud, crime, theft, and money laundering is happening.

The AFL-CIO, the largest federation of unions in the country, warned House Democrats not to vote for either CLARITY or GENIUS. Such problems with Democrats would have gotten even worse if House Republican leadership had acquiesced to the demands of hardliners like Greene and added anti-CBDC language to the CLARITY Act.

Late Wednesday night, after the longest vote in House history, House Republicans emerged with a deal to add anti-CBDC language to a pending defense spending bill and keep crypto legislation as-is. Republican leadership now plans to bring all three crypto bills up for individual votes.

While the breakthrough now all-but guarantees the passage of the GENIUS Act, the mayhem of the last few days has almost equally likely doomed the prospect of the House’s market structure bill, the CLARITY Act, ever becoming law. Even if CLARITY narrowly passes the House, it will all-but certainly be dead-on-arrival in the Senate, given the bloodiness of this week’s proceedings and the bill's likely meager bipartisan support.

One industry expert likened the week’s events to a plotline in the HBO series “House of the Dragon,” where a king must decide whether to let his pregnant wife and unborn baby both die, or kill his wife to save the child. The queen, the industry expert said, is the CLARITY Act, and her treacherous time in labor represents the current state of affairs in Congress. “Either way, the queen is dead,” they said.