Behind the U.S. Senate Agriculture Committee's passage of the "CLARITY Act" lies a bleak outlook

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Author: Zen, PANews

By the end of January 2026, the U.S. Senate Agriculture Committee narrowly passed the “CLARITY Act” with a 12-11 party-line vote, aiming to regulate the structure of the cryptocurrency market.

“This is an important step toward establishing clear rules for the digital asset market,” said Committee Chairman and Republican Senator John Boozman, hoping this move will generate momentum within the Senate to push legislation forward.

However, due to collective opposition from Democratic senators, the committee vote was only passed with strict partisan divisions. As a result, many observers see this as a “limited substantive progress” step, but whether the bill can become law smoothly in the future remains uncertain.

Define digital commodities clearly and establish CFTC regulatory authority

The crypto market structure bill passed by the Senate Agriculture Committee aims to establish a comprehensive federal regulatory framework for the digital asset sector.

As Committee Chairman and Republican Senator John Boozman pointed out in his pre-meeting speech, the U.S. Commodity Futures Trading Commission (CFTC) is suitable for regulating spot trading of digital commodities. From a macro perspective, the bill provides a clear definition of digital commodities, protects innovation and technology, establishes consumer protection measures, and provides the necessary resources for the agency to undertake this new responsibility.

Senator John Boozman, Chairman of the Senate Agriculture Committee

The core of the bill is to clearly define “digital commodities” and authorize the CFTC to establish a regulatory mechanism for spot market digital commodities. The bill requires the CFTC and SEC to develop coordinated rules for cross-sector areas to avoid regulatory gaps or conflicts. This structure is viewed by industry insiders as favorable for classifying more digital assets as commodities, thereby avoiding the strict regulation of securities laws.

The bill proposes establishing a federal registration system for digital commodity exchanges and brokers, requiring relevant platforms to register with the CFTC and undergo compliance regulation. Legislators hope to encourage compliant operation of digital asset trading markets within the U.S., while also enhancing market liquidity and resilience. The CFTC will also receive new funding sources to support the implementation of this spot market regulatory mechanism.

To strengthen investor protection and market integrity, the bill also sets up a series of investor protection measures, including client fund segregation, conflict of interest prevention, and mandatory information disclosure requirements. These provisions aim to prevent trading platforms from misappropriating user assets, insider trading, and other misconduct, thereby increasing market transparency.

Additionally, the bill includes protections for software developers and innovative technologies, ensuring that open-source coding, blockchain node operations, and other technological innovations are not unnecessarily restricted due to regulatory uncertainty.

Beyond the above provisions, Democrats have proposed three amendments during the review, including the “Digital Asset Ethics Act,” which restricts involvement of presidents, vice presidents, members of Congress, and candidates in issuing, sponsoring, or endorsing digital assets; measures to combat “crypto ATM/self-service kiosk” scams; and a ban on federal aid to bankrupt crypto institutions. However, all three amendments were rejected by Republicans.

From bipartisan cooperation to sudden negotiation breakdown

Last November, based on the “Digital Asset Market Transparency Act” passed by the House in July, the U.S. Senate Agriculture Committee released a draft legislation for cryptocurrency industry regulation. Co-authored by Senator Boozman and Democratic Senator Cory Booker, the draft addressed many unresolved issues but was still regarded as a very meaningful positive development.

“From November last year to the end of the year, we worked nine to five every day, holding long meetings with all stakeholders for several weeks, collecting feedback and ideas with Boozman’s team,” a Senate Democratic aide familiar with the matter told The Block. The negotiations at the Senate Agriculture Committee were originally a “very good bipartisan cooperation process,” but things suddenly changed at the beginning of the new year.

“We really felt we were very close to reaching a bipartisan agreement,” the aide said. In early January, Boozman’s team suddenly informed them of a change in plans, secretly drafted a new version of the bill, and planned to start deliberation on January 15. Boozman’s team claimed they had made enough revisions to the bill text and it was time to vote. However, this bill overturned months of bipartisan cooperation.

Although the cooperation broke down, before the hearing, Democrats still tried to persuade Republican members of the Agriculture Committee to return to negotiations to reach a bipartisan consensus before the official vote. However, the final decision was to proceed with a party-line vote. The bill will be submitted to the full Senate for consideration without Democratic support.

Democratic lead negotiator and New Jersey Senator Cory Booker attributed the partisan shift in negotiations to the Trump administration. He emphasized that Trump’s personal involvement in the crypto sector was a key obstacle to legislative approval.

Senator Cory Booker

Boozman said there are fundamental policy disagreements between the parties. He also stated that he remains committed to working with Democrats to push the bill through Congress, adding, “What we want is a bipartisan bill.”

In fact, the three key amendments proposed by Democrats show no signs of cooperation or compromise. Ethical issues have always been the main obstacle to bipartisan cooperation. Democrats have been pushing to include restrictions on officials’ involvement in crypto businesses to prevent ongoing corruption among public officials. These clearly targeted conflict-of-interest clauses, which are unlikely to gain broad support or compromise from Republicans.

Besides ethical clauses, Democratic members also raised objections to DeFi regulation and consumer protection measures. They worry that the Republican draft may lack sufficient regulation of DeFi, potentially allowing decentralized trading platforms to operate outside regulatory oversight, creating loopholes for money laundering and fraud.

Progress has been made, but no substantive progress

“America needs to pass this bill quickly to avoid losing momentum under the current pro-crypto government leadership,” said Patrick Witte, Executive Director of the U.S. President’s Digital Asset Advisory Committee, on X platform on January 21, commenting on Coinbase CEO Brian Armstrong’s withdrawal of support for the Senate Banking Committee’s crypto bill.

“You may not like every part of the CLARITY Act, but I can guarantee you will dislike the future Democratic version even more,” Witte said. He believes that a crypto bill will inevitably be enacted, but if it passes under a Democratic administration, the final legislation will be very bad, possibly even worse than no legislation at all.

Therefore, Witte advocates seizing the current opportunity, taking swift action to pass legislation quickly. He said that to secure 60 votes in the Senate, some compromises are necessary, “but don’t let perfect be the enemy of good.”

According to the legislative process in the U.S. Senate, a bill generally needs at least 60 votes to overcome lengthy debate (filibuster) and pass. Currently, Republicans hold a narrow majority with 53 seats, meaning even if all Republican senators support it, at least 7 Democratic senators must join to reach the 60-vote threshold.

However, Democratic members of the Agriculture Committee have collectively voted against it and expressed strong opposition publicly. This makes the committee-level approval more symbolic, with limited substantive legislative progress, and the core disputes remain unresolved.

At the hearing, Booker pointed out, “The White House has made this incredibly difficult. It’s absurd that the President and his family have earned billions from this industry but are still trying to craft a framework without including ethics rules to prevent such severe corruption—this will undermine our democracy.”

Democrats worry that without clear restrictions, government officials “using their positions to profit from the crypto industry” could damage public trust. The senior Democratic member of the House, Public Citizen, even mockingly called the current version of the bill the “gryfto bill” (a play on “crypto” and “grift,” meaning profiting illicitly under the guise of crypto), criticizing it for failing to close loopholes for the President and his relatives’ interests.

Amid strong opposition from Democratic lawmakers, the bill’s prospects in the full Senate have become complicated and bleak. Without substantial bipartisan compromise, this crypto market structure bill is very likely to face obstacles during full Senate votes.

Additionally, related legislation managed by the Senate Banking Committee remains stalled. Due to unresolved disputes over stablecoin yields and more urgent housing legislation affecting people’s livelihoods, the committee postponed the scheduled bill review in January, with no new date set, likely delaying until the second quarter.

This means that even if the Agriculture Committee’s version barely enters full Senate discussion, the complete Senate crypto legislation remains unformed. Subsequent steps may involve merging and coordinating the two committee versions and aligning with the House-passed version. If the Senate cannot reach consensus on a unified version in time, the legislative timetable will be further extended.

Time also adds uncertainty to the bill’s prospects. 2026 is the midterm election year in the U.S., and generally, Congress’s willingness and ability to pass major legislation decrease in the months before elections. If this crypto market structure bill fails to make significant progress in the first quarter of 2026, it may be squeezed out of the annual legislative schedule, missing the window.

More critically, the November elections could change the majority party in the Senate. Some analysts suggest that if Democrats regain control after the election, the unfinished crypto legislation could face substantial amendments or shelving.

However, some Democratic lawmakers, including Booker, have stated they are not entirely opposed to the legislation itself. They emphasize that as long as key ethical and protective provisions are met, they are “willing to work toward common ground.” But if partisan conflicts continue, prospects may become increasingly bleak as the election approaches.