"Customer assets should not become creditors' first course." That line from Sen. Cynthia Lummis sums up what drove the latest rewrite of the CLARITY Act, released by Senate Republicans after a round of stakeholder briefing calls. The updated text lands with a specific target in mind: stopping top U.S. officials from cashing in on crypto while holding public office.
Under the revised language, the president, vice president, members of Congress, and federal judges would be barred from issuing or sponsoring digital assets for compensation during their time in office. The ban extends to their spouses and carries a hard expiration date of January 20, 2029. Officials who already hold crypto would need to either sell those positions or move them into a blind trust. The Department of Justice would gain civil enforcement authority, including the power to sue exchanges that knowingly list tokens that fall under the prohibition. The ethics package was negotiated directly between the White House and GOP senators Lummis and Bernie Moreno. Democrats have not signed on yet, so bipartisan talks remain open as the bill edges toward a Senate floor vote.
Lummis anchored the customer protection argument in the Terra collapse, which wiped out roughly $40 billion before bankruptcy proceedings absorbed much of what was left. The updated bill draws a hard line between reserve-backed assets and algorithmic products like Terra, and it builds in bankruptcy protections requiring exchanges and custodians to keep customer assets completely separate from the company's own estate. The intent is to avoid a repeat of the FTX situation, where customer funds got tangled in the bankruptcy pile and customers ended up waiting years to recover anything. The bill would treat those holdings closer to how traditional brokerage accounts are handled.
Several other provisions carried over from earlier versions without changes. The Blockchain Regulatory Certainty Act still clarifies that non-custodial developers and blockchain infrastructure providers do not qualify as money transmitters simply for building or maintaining decentralized networks. The Lummis-Grassley amendment keeps federal criminal liability in place for anyone who knowingly facilitates unlawful transactions. The Keep Your Coins Act section protects individuals' right to self-custody their assets without going through a third-party platform. Stablecoin yield rules also remain intact from the Senate Banking Committee draft.
This article is for informational purposes only and does not constitute financial or investment advice.
