Democrats ‘Move the Goalposts’ on Clarity Act Hours Before Key Senate Vote

Good morning from Washington, D.C., where later today the Clarity Act will face its first big test on the Senate floor.

In order to advance, the bill needs 60 senators to vote to invoke cloture and move toward formal floor debate. Getting this far has taken over a year of Senate negotiations and more than five years of attempts by Congress to pass comprehensive crypto market structure legislation.

The 2:15 p.m. ET vote comes after Senate Republicans released updated text Sunday evening that they say makes major concessions on ethics, software developer protections and the Ag title, while adding a new “circuit breaker” aimed at addressing concerns that stablecoin yield could drive deposit flight from community banks.

In all, Republicans say the draft incorporates 126 substantive changes requested by Democrats.

But Democrats still aren’t satisfied

Late Monday, Senate Democrats sent Republicans a counteroffer responding to changes in Republicans’ latest text, according to two people familiar with the proposal. It does not seek further changes to the stablecoin yield provisions, an issue sources have described as “Republican-only.”

On ethics, Democrats are seeking additional restrictions on large crypto holdings, dependent children, and paid crypto promotions. On the Blockchain Regulatory Certainty Act, they want further changes to narrow the scope of the provision and affirmatively state that nothing in it modifies criminal law, while their Ag title changes include tighter rules around exchanges and conflicts of interest, and protections for Tribal gaming laws.

Republicans are pushing back

“In response to a significant step in their direction, Democrats have chosen to move the goalposts again,” Senate Banking Committee spokesperson Jeff Naft said in a statement. “Republicans made 126 substantive changes at Democrats’ request, including major changes to address their ethics concerns. Yet we are hearing the same unreasonable asks and the same refusal to take yes for an answer. The final text is public.”

The new counteroffer follows comments from several key Senate Democrats, including Mark Warner (D-VA), Ruben Gallego (D-AZ) and Raphael Warnock (D-GA), who have said the ethics proposal signed off on by President Trump still needs work. Senator Elizabeth Warren’s (D-MA) objections go further, arguing the new ethics language gives Trump administration officials too much control over enforcement and leaves loopholes that would allow the president to continue profiting from some of his existing crypto interests.

Senator Catherine Cortez Masto (D-NV), who has been the face of Democratic negotiations over the Blockchain Regulatory Certainty Act, is said to be behind the further changes to the provision, despite pushback from both the industry and Congressional Republicans over concessions already made to address her concerns, including the removal of explicit criminal protections.

It’s unclear whether Senate Republicans, who called the text released Sunday evening their “last, best and final” offer, will be open to making further changes ahead of the vote or tell Democrats they need to vote to get on the bill if they want to see further changes.

Speaking to Crypto In America Monday, White House Crypto Council Executive Director Patrick Witt suggested there was little appetite for further negotiation.

“If there are any changes, we’re talking about punctuation at this point or technical changes,” Witt said. “I view that as definitely a best and final offer.”

Senator Kirsten Gillibrand (D-NY) has been privately urging her Democratic colleagues to vote to get on the bill and continue negotiations on the floor, according to Politico.

And the banking lobby isn’t backing down without a fight

Eight banking trade groups, including the American Bankers Association and Independent Community Bankers of America, pushed back on the new text Monday, saying the deposit flight “circuit breaker” added by Republicans is “not a safeguard at all” because it would only kick in after substantial deposit flight had already occurred.

The circuit breaker would effectively act as a backstop, allowing the Treasury Secretary to intervene if there is evidence of widespread movement of deposits from community banks to stablecoins.

In a letter to Senate leaders, the groups once again called for further tightening of the stablecoin rewards language to close what they describe as loopholes that could still allow interest-like payments on stablecoin balances.

The White House is pushing back, too

The Council of Economic Advisers this morning launched a new interactive tool that allows users to test the banking industry’s deposit flight argument for themselves. It builds on earlier CEA analysis that found “no meaningful relationship between stablecoin growth and community bank deposit flight.”

Witt had some strong words for the banks Monday, arguing that Republicans had already gone to significant lengths to address their concerns, including through the new circuit breaker.

“If you oppose the Clarity Act because you just hate crypto, that’s fine. Just say that,” Witt told Crypto In America, adding that he questions the “good faith nature” of the banks’ continued objections.

That continued opposition could matter for the Republican whip count.

Some Senate Republicans remain on the fence amid concerns raised by the banking industry over the stablecoin yield language. Senator John Curtis (R-UT) told reporters he would vote to get on the bill this afternoon but remains a no on final passage over the banks’ objections. Senators John Cornyn (R-TX) and Susan Collins (R-ME) told reporters they’re still considering how to vote.

One development that helps Republicans with the raw headcount: Senator Mitch McConnell (R-KY) returned to the Senate Monday night after a three-month absence. In an X post, McConnell said, “I will do my best to be present for tough votes when our Conference needs me.”

Today’s Clarity Act vote could prove to be one of them.

Witt, for his part, told Crypto In America he feels “very good” about the vote, but acknowledged that the final outcome may have little to do with the substance of the bill.

“Whether or not we get 60 votes is going to be a political calculation, not a policy calculation,” he said.

Crypto in America is a newsletter written by Eleanor Terrett. Follow the link to read in full and subscribe.