Inside the Trump Crypto War Room: What the New ‘Clarity Act’ Means for Silicon Valley

In the months after the 2024 election, a small group of people in the West Wing came to the conclusion that regulating cryptocurrencies would be a key policy initiative of the second Trump administration. This was not merely a campaign talking point or a footnote, but rather a real legislative priority. The most prominent figure in this endeavor has been David Sacks, who was appointed as the administration’s AI and crypto czar. Longtime advocates of the CLARITY Act, Marc Andreessen and Fred Ehrsam, are currently members of the Presidential Council on Science and Technology. For a White House that doesn’t always speak with a single voice, the message from the top has been remarkably consistent: America will become the global center for cryptocurrency, and the previous administration’s regulatory framework must be dismantled to make that happen.

The Digital Asset Market Clarity Act, also known with a certain legislative grandiosity as the CLARITY Act, is the legislation at the heart of this goal. The bill, which was passed by the House in July 2025 with a vote of 294 to 134 and genuine bipartisan support, accomplishes a number of goals that the cryptocurrency industry has been requesting since about 2017. It transfers regulatory control over spot digital commodity markets from the SEC to the CFTC, putting an end to what the industry has, with some justification, referred to as “regulation by enforcement”—the practice of the SEC suing cryptocurrency companies instead of creating explicit guidelines they could adhere to beforehand. It establishes the definition of a “digital commodity” by linking classification to the degree to which a token’s value is linked to a working blockchain. Additionally, it makes it possible for tokens that were initially sold to investors as securities through what could be considered an investment contract to become commodities after their underlying blockchain is judged to be sufficiently decentralized and operational.

These provisions are very important to Silicon Valley. Launching a token, developing a DeFi protocol, or even running a crypto wallet interface carried real regulatory risk that was hard to measure and impossible to plan around due to the SEC’s aggressive posture during the previous administration. When founders sought to establish in the US, they had to consult securities attorneys, who were unable to provide them with clear answers. Many just relocated their projects offshore, to places like Singapore, Switzerland, or the United Arab Emirates, which had established frameworks and weren’t threatening quarterly enforcement actions. That issue is directly addressed by the CLARITY Act, which excludes protocol builders, wallet providers, and software developers from broker-dealer classification. Startups have a useful on-ramp that eliminates the need for years of legal preparation prior to launch thanks to the $75 million exemption from SEC registration for token sales within a 12-month window.

A disagreement that shows how much is at risk for the current financial system is what is delaying the bill in the Senate. The ability of cryptocurrency platforms to offer stablecoin rewards, which essentially pay interest to users who hold stablecoins on platforms like Coinbase, has been the subject of intense lobbying by traditional banks. Regulated stablecoins that offer yields higher than what a savings account pays could cause a sizable outflow of deposits from the conventional banking system, which is the banks’ simple and, if you’re a banker, perfectly reasonable concern. There are substantial numbers at stake. The impact on bank funding would be substantial and possibly destabilizing for smaller institutions if even a small portion of the trillions of dollars kept in American savings accounts were transferred to yield-bearing stablecoins.

The Senate version of the bill contained language that prohibited stablecoin rewards, which is where things got complicated. The banks were successful in getting this language included. According to Coinbase CEO Brian Armstrong, the rewards ban is a “red line” that would immediately eliminate one of the exchange’s most significant sources of income, which comes from its collaboration with Circle on the USDC stablecoin. Armstrong completely withdrew Coinbase’s support for the legislation in January 2026. There was an instant political fallout. Despite the largest US cryptocurrency exchange’s stated opposition, senators who had been willing to advance the bill were reluctant to enact crypto regulation. The January 15 hearing was rescheduled. Since then, the window has been getting smaller.

The irony in this is difficult to ignore. For years, the industry pushed for regulatory clarity, claiming that it would enable US cryptocurrency firms to compete with foreign competitors using well-established frameworks. Now that a bill offering precisely that clarity has passed one chamber of Congress with bipartisan support, the industry is preventing itself from obtaining it because the particular regulations that go along with it don’t work for every business model. Coinbase’s stance makes sense from a business standpoint. Additionally, the industry as a whole may lose out on the regulatory framework it says it wants.

Everyone is working backward from the difficult deadline of the November 2026 midterm elections. The CLARITY Act in its current form is most likely dead if Republicans lose their congressional majorities, and the industry will be stuck in the regulatory limbo it has been complaining about for almost ten years for at least two years. There are still three plausible outcomes: a compromise that brings Coinbase back to the table, possibly through carve-outs on the rewards ban; passage without Coinbase’s support, establishing a precedent that regulation occurs with or without industry consensus; or failure and a reset that pushes everything to 2027 at the earliest. Which of those outcomes is most likely is still unknown. It is evident that the window is closing and that those who are most in favor of this legislation are also among those who are actively working to keep it from passing.