New CLARITY Act Text Reshapes DeFi Rules With Ethics Still Unresolved

• The CLARITY Act introduces new DeFi rules while expanding the scope of US crypto regulation
• The ethics clause remains largely unchanged, keeping a major point of disagreement with Democrats unresolved
• The September 15 vote will test whether the revised CLARITY Act can gain enough Democrats support to move forward

The Clarity Act is once again back in the mainstream spotlight, but this time for a very different reason. As the September 15 vote looms over, the Clarity Act text has received a major overhaul. This overhaul has ended up adding new conditions for the Act. A new 630-page rewrite has been released which now includes rules for DeFi and credit unions. However, the ethics clause, which remains a major hurdle to securing Democratic support for the act, remains largely unchanged. What’s happening? Let’s explore in depth.

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What Changed in the Clarity Act?

The latest draft of the Clarity Act is a 630-page rewrite introduced by the Senate Republicans, including a fresh set of rules for crypto. The write-up now includes provisions for DeFi rules. New rules would require non-decentralized trading protocols to register with the CFTC, with the legislation focusing on whether a person or group materially controls or changes the protocol, its operations or rules.

Other than that, the bill also has rules for spot and cash digital commodity transactions. This provision is tailored in part to address tribal governments’ concerns about legislation impacting prediction markets.

Another change has been made to tend to the credit unions. This change focuses on clarifying how credit unions can conduct crypto-related activities.

Senator Lummis shared an update on the latest draft, adding how nearly 114 provisions have now been incorporated. These changes have been added as per the requests of the Democrats.

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Ethics Clause Remains Unchanged

However, one of the most disputed issues raised by the Democrats still remains largely unresolved. The ethics clause, which is deemed a key hurdle obstructing Democratic support for the Clarity Act, remains largely unchanged.

This current version of the ethics clause mentioned in the act was intended to restrict public officials and their spouses from issuing or sponsoring digital assets. Democrats had earlier argued about the language of the ethics clause mentioned in the Clarity Act. They shared how the language needs to be bolstered to outline the clause prominently.

Other than that, Democrats also wanted to strengthen rules related to consumer safety, illicit finance, conflict of interests and market integrity.

What Happens Now?

The September 15 vote process is now inching closer than ever. The upcoming vote is a cloture vote to advance consideration of the legislation, rather than a final vote to make the Clarity Act law.

With the renewed draft being introduced, Republicans still need Democratic support to reach the 60 votes required to advance the crypto regulation bill. However, the major issues raised by Democrats, including the ethics clause, remain unresolved, which could make the path forward more difficult.

The Clarity Act could still move forward if lawmakers reach an agreement.

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