CLARITY Act meets Groundhog Day; GOP steals Dems’ crypto crown

Like something out of a horror movie, the U.S. Senate’s digital asset market structure legislation is being threatened by the sudden resurrection of issues thought dead and buried.

• CLARITY or FUTILITY?
• Blockchain groups press House to move on mining/staking tax bill
• Crypto PACs face Tuesday test
• DCG survey tries to resurrect ‘crypto voter’ concept
• Republicans now more likely than Dems to own digital assets

Monday brought the start of the Senate’s final week of work before senators adjourn for their nation’s birthday, and they won’t be back at work until July 13. After that return, there are only a few weeks until the Senate adjourns for its traditional August break, which stretches until September 13.

And with much of the Senate in full-on campaign mode come October, the sand in this legislative hourglass is rapidly running out, and with it, chances of resolving conflicts in the Senate’s digital asset market structure bill before the November midterm elections.

Among the CLARITY Act items left to resolve: the ‘ethics’ issue, aka how to rein in the Trump family’s crypto excesses; the ‘illicit finance’ issue, aka how much legal immunity decentralized finance (DeFi) developers should enjoy when bad actors use their platforms to commit crimes; a last-minute demand by America’s commercial and tribal gaming operators to include a ban on prediction markets offering sports bets without state gaming licenses, plus a few others.

And believe it or not, there’s also the issue of whether crypto platforms can offer ‘rewards’ to customers who engage in certain stablecoin-based activities. While this issue was thought to have recently been resolved (in the platforms’ favor), the banking sector isn’t ready to call it quits.

Crypto in America journo Eleanor Terrett reported last Friday that the issue remains “very much in play” thanks to banking groups reaching out to senators who don’t hold seats on the Banking and Agriculture committees. In other words, senators who haven’t been focused on this issue all year are now getting an earful from their local community banking advocates.

The differences between the Banking/Agriculture committees’ versions of CLARITY must first be reconciled before any bill can come to the Senate floor for a vote. And last week, Ag chairman John Boozman (R-AR) told Punchbowl News that “one of the issues that we have is, a lot of members don’t understand it. In fact, I would say most members don’t.” Bodes well.

But crypto advocates aren’t giving up, as The Digital Chamber is organizing a ‘member fly-in’ to Washington, D.C., on June 23 to press the CLARITY agenda. Banking committee member Cynthia Lummis (R-WY), who isn’t running for re-election come November, has nonetheless issued no less than 10 ‘pass CLARITY now’ tweets in just the past seven days, addressing everything from DeFi to investor disclosure requirements to law enforcement.

On a more tangible front, the Senate approved the 21st Century ROAD to Housing Act on Monday, including the last-minute addition of language prohibiting the Federal Reserve from issuing a central bank digital currency (CBDC) before January 1, 2031.

The Housing bill now returns to the House of Representatives, where some will likely push to make that CBDC prohibition permanent. However, that would force the Act to make a return trip to the Senate, so House leadership will probably lean on Freedom Caucus members to just take the CBDC W already.

Death is more certain than tax (relief)

It’s a longshot, but the crypto sector is also pressing Congress to steer new tax legislation into the ‘must pass now’ lane. On Monday, the CEOs of the Blockchain Association, Crypto Council for Innovation, and The Digital Chamber signed a joint letter urging the House Ways & Means Committee to approve HR 9175 aka the Tax Clarity for Mining and Staking Act.

The bill would eliminate instant taxes applied to tokens generated by block reward miners and/or those staking assets on networks like Ethereum that rely on proof-of-stake consensus mechanisms. Instead, taxes would only be applied when those tokens are sold.

The joint letter urges W&M committee chair Jason Smith (R-MO) and ranking member Richard Neal (D-MA) to swiftly pass HR 9175 “as introduced.” The letter claims that further debate “would risk reviving the very problems the bill resolves and stalling a bipartisan result that is finally within reach.”

On the other side of this argument is the American Banking Association (ABA), which believes the bill, as written shows “clear favoritism for cryptocurrencies over other asset classes,” thereby offering tokens “a significant advantage over nearly every other way Americans save, invest and earn returns today.”

The ABA insists it’s not arguing against digital assets in general, it’s just seeking asset “parity.” The bankers note that when companies pay dividends, shareholders are required to pay tax in the same year. Similarly, bank interest on saving accounts or certificates of deposit is taxed annually, “even if the interest remains in the account and is never withdrawn.”

The ABA’s issue echoes its view of the stablecoin ‘yield’ debate, in that “legislative favoritism to reroute bank deposits toward tax‑advantaged, crypto-yield products could shift capital away from the banking system and directly hinder community lending, small businesses, and broader economic development.”

Last week’s W&M debate on the seven crypto tax bills the GOP abruptly threw into the mix was met with resistance from Dems, who suggested more time was needed to make the right choices. That alone could doom the industry’s desire for an ‘as-is’ rubberstamping of HR 9175.

More to the point, Congress has way too much on its plate at the moment to expect any significant time/effort to be dedicated to what is a fairly niche issue, at least, when compared with stopping wars and jumpstarting moribund economies.

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Crypto PACs face Tuesday test

Referencing crypto-sponsored ads that never mention crypto when promoting a favored candidate or attacking that candidate’s rivals, Sen. Chris Van Hollen (D-MD) warned voters to “understand that the organizations running the ads have their own special interests at heart, not the public interests, not the interests of the people of Maryland’s 5th Congressional District.”

Van Hollen went on to question what promises Boafo—who this spring co-sponsored pro-blockchain legislation in the state legislature that would, among other things, prohibit the state from cracking down on digital asset staking—might have made to his deep-pocketed backers to win their support. The Washington Post quoted Boafo calling Van Hollen’s insinuations “extremely insulting.”

Boafo also has the support of the Blockchain Leadership Fund (BLF), the crypto PAC launched this spring with the support of crypto custodian/bank/stablecoin issuer Anchorage Digital and DeFi/tokenization fans Chainlink Labs. BLF endorsed Boafo in May but we won’t know the full extent of their financial support until the group files its Q2 spending report with the Federal Election Commission (FEC).

In New York, Rep. Ritchie Torres (D-NY) is expected to cruise to victory in his primary race, thanks in part to $1.4 million in support from Protect Progress. Torres also has the support from the Tether-linked Fellowship PAC, which spent ~$300,000 supporting Torres’ campaign.

Also in New York, the Democratic primary in the race for the open House District 12 seat has seen over $24 million in outside funding from primarily AI-focused groups, albeit ones with many of the same funders as the major crypto PACs.

All of this New York 12 spending has gone either to support or to defeat Alex Bores, with individual contributions from the likes of Ripple co-founder Chris Larsen and Palantir’s Joe Lonsdale (who also backs the crypto-friendly bank Erebor).

Last week, Fairshake’s pro-Republican offshoot Defend American Jobs (DAJ) spent $12 million ($7.4 million in the primary, and another $4.7 million in the runoff) to see Rep. Barry Moore (R-AL) fend off rival Jared Hudson in the race to compete for the exiting Tommy Tuberville’s Senate seat this November.

Joining DAJ in their Moore support were the Fellowship PAC ($350,000) and individual $7,000 contributions from Cameron and Tyler Winklevoss, founders of the Gemini (NASDAQ: GEMI) exchange-turned-prediction market.

Moore has dismissed critics’ allegations that he’s been “bought” by “out-of-state crypto billionaires,” claiming that he simply shares Fairshake’s antipathy towards CBDCs. (Either that, or he’s read those polls that show voters hate crypto PACs.)

Moore’s pricey primary victory will take some of the sting out of Fairshake’s March failure in Illinois, where $10 million proved insufficient to defeat crypto critic Lt. Gov. Juliana Stratton’s bid for the Democratic nomination for the state’s open Senate seat.

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Who you gonna believe, me or your own lying survey numbers?

Crypto PACs have routinely trumpeted the success of their electoral influence campaigns in veiled threats to pols/candidates regarding the dangers of “anti-crypto hostility.” But since none of these PACs feel secure enough to mention crypto in their campaigns, the threat comes from the deep-pocketed, self-interested PACs themselves, not voters.

And yet, despite survey results from more impartial sources that show only 4% of U.S. voters give a toss about a candidate’s crypto stance, efforts to perpetuate the ‘crypto voter’ myth continue. Earlier this month, Digital Currency Group (DCG) claimed in a press release that a new Harris Poll had found that 40% of registered voters view crypto as “a major election issue.”

The actual survey results clarify that 43% of voters agreed with the statement “crypto is a major issue I’m considering during the next election,” while 59% wish “political candidates talked more about digital currency.” But neither of these statements is explicitly pro-crypto, meaning many who agree could be eager to see greater curbs on companies dealing in digital assets.

For example, while 47% of voters had a ‘positive’ or ‘very positive’ perception of crypto, 53% had a negative view. And 24% held a ‘very negative’ perception versus only 16% who held a ‘very positive’ view.

And while 60% of voters said “Congress should pass clear rules for digital assets now, even if those rules need to be updated later as the technology evolves,” that statement is neutral on whether crypto should be granted greater freedom to move or kept on an even shorter leash. Meanwhile, 88% of voters said they wanted “policymakers to be sure they understand crypto before regulating,” which somewhat negates that ‘pass clear rules now’ finding.

Also consider that the survey found that only 22% of respondents cited ‘crypto’ as one of the “paths for building wealth that investors are interested in.” For the record, crypto ranked ninth on a 10-deep chart, outranking only ‘collectibles.’ Et tu, Pokémon?

Asked to name the “top five descriptors of cryptocurrency,” the top three words were ‘risky’ (61%), ‘confusing’ (41%), and ‘volatile’ (39%). ‘Innovative’ (32%) broke this negative pattern, but was followed by ‘misleading’ (26%), so trumpet that innovative victory at your peril.

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GOP claims crypto mantle from Dems

A different survey from Pew Research found that 19% of U.S. adults have ever ‘invested in, traded, or used a cryptocurrency,’ up a modest three points since Pew’s 2021 survey. Not surprisingly, men (27%) are far more likely than women (11%) to answer in the affirmative, as are those under 50 (27%) compared with those aged 50+ (10%).

In racial terms, crypto users were fairly evenly split between whites (18%), Hispanics (19%), and blacks (20%), while Asians (English speakers only) were the outliers at 25%. In economic terms, upper-income respondents (27%) were most likely to either use or have used crypto, well ahead of the middle-income (20%) and lower-income (16%) tiers.

But the biggest surprise is that 22% of Republicans and those who ‘lean’ Republican admitted having ever gotten near crypto, five points better than their Dem/lean-Dem counterparts. The Dem figure is unchanged from 2021, while the GOP number is six points higher than five years ago.

The Pew survey reinforces the increasing partisan tilt toward digital assets seen in Congress that has led some GOP pols to demand absolute loyalty from PACs spending on the midterms. While Fairshake and its offshoots insist that their only loyalty is to crypto boosters, some other PACs are explicitly GOP supporters. So is this a natural progression for the GOP, or are they just better at spotting a mark?

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