Senate Republicans Revise Clarity Act with New DeFi Rules Ahead of Vote

Senate Republicans released a revised 630‑page draft of the Clarity Act five days before a scheduled procedural vote on September 15. The amendment introduces federal oversight for certain cryptocurrency trading protocols that do not meet a new decentralization standard.

New DeFi Oversight

The draft creates a category called “non‑decentralized finance trading protocol.” Entities or coordinated groups that have direct or indirect authority to control a protocol’s functions, operations, or consensus rules would be required to register with the Commodity Futures Trading Commission (CFTC). The bill tasks the CFTC and the Treasury Department with developing implementing rules to apply the standard across varied technical and governance structures.

Bipartisan Input and Procedural Threshold

Senator Cynthia Lummis (R‑WY) said the revision incorporates more than 114 provisions requested by Democratic senators during negotiations. Although the version is described as bipartisan, no Democratic senator has publicly endorsed it. Because Republicans hold 53 seats, at least 60 votes are needed to move the bill to formal debate and amendment.

Ethics Provision Remains Contested

The revised act retains an ethics clause that bars public officials, government employees, and their spouses from issuing or sponsoring digital assets. Enforcement would remain primarily with the Justice Department, and the restriction would expire in January 2029. Democratic lawmakers have criticized the provision as too limited in scope and duration.

Stablecoin Rewards and Banking Concerns

Disagreements continue over whether stablecoin‑based rewards could divert deposits from insured bank accounts. Earlier Senate language prohibited rewards based solely on holding stablecoins while allowing incentives tied to payments, loyalty programs, or other qualifying activities. Banking groups and crypto firms have lobbied heavily on this issue.

Next Steps

If the procedural vote reaches the 60‑vote threshold, the Senate can begin floor debate, consider amendments, and eventually reconcile the bill with the House version before it could be presented to the President. The timeline is tight, with the November midterm elections approaching.