Why Could The Crypto Ethics Proposal Benefit Trump?
A bipartisan ethics proposal designed to win President Donald Trump’s support for the Clarity Act could also give him a substantial personal tax advantage by requiring him to divest from crypto-related businesses.
Sens. Thom Tillis, R-N.C., and Ruben Gallego, D-Ariz., sent Trump proposed ethics language last week that would require the president to sell interests connected to cryptocurrency businesses. People familiar with the negotiations said such a divestiture could allow Trump to defer capital gains taxes on those holdings for years and potentially avoid some of the liability altogether.
The potential savings could run into millions of dollars because Trump’s family has built extensive financial interests in digital assets. In June, Trump reported more than $1.4 billion in income from family crypto ventures during the previous year.
Those interests include the TRUMP and MELANIA memecoins, launched shortly before his inauguration, as well as the World Liberty Financial crypto venture associated with members of his family.
The ethics proposal has not been released publicly and remains under negotiation between lawmakers and the White House. The White House had not commented on the reported tax implications as of Thursday.
Why Has Ethics Become Critical To The Clarity Act?
The Clarity Act is intended to establish a federal framework for cryptocurrency markets and define how financial regulators divide authority over digital assets. Passing it through the Senate requires 60 votes, meaning Republicans need Democratic support.
Several Senate Democrats have made stronger ethics restrictions a condition for backing the bill. Their concern is that elected officials could influence crypto policy while holding financial interests that may benefit from those decisions.
The Tillis-Gallego proposal attempts to address that problem through mandatory divestment. The latest version also reportedly allows state attorneys general to enforce the ethics rules, giving enforcement authority outside the federal Justice Department.
That differs from an earlier version approved by Trump in late July, which placed enforcement exclusively with the Justice Department and prevented state attorneys general from acting. Because the attorney general is appointed by the president, some lawmakers sought an enforcement mechanism that was less dependent on the executive branch.
Investor Takeaway
The ethics dispute has become more than a political side issue. It may determine whether the Senate can assemble the 60 votes needed for the first comprehensive U.S. crypto market structure bill, affecting how exchanges, token issuers and other digital asset companies are regulated.
Could The Ethics Deal Help Or Hurt Passage?
The unusual problem for lawmakers is that a rule intended to separate Trump from crypto businesses could simultaneously create a tax benefit for him. That may complicate negotiations because Democrats seeking tougher ethics protections could face criticism if the mechanism produces favorable tax treatment for the president.
For supporters of the provision, the central objective remains removing financial conflicts between presidential policymaking and private crypto holdings. For opponents, the possibility of large tax deferrals may raise questions about whether mandatory divestment achieves that objective without creating another financial advantage.
The ethics issue is only one obstacle facing the Clarity Act. Republican support has also weakened around other sections of the bill.
Sen. Josh Hawley, R-Mo., has said he will not support the legislation without changes addressing the risk that deposits could move away from banks. Sens. John Cornyn, R-Texas, John Curtis, R-Utah, Mike Rounds, R-S.D., and James Lankford, R-Okla., have also raised concerns about deposit flight and stablecoin yield provisions.
Negotiators are separately working through disagreements involving decentralized finance, adding another hurdle before Senate leaders can move toward a final vote.
Is Congress Running Out Of Time For The Crypto Bill?
The legislative calendar has become one of the biggest threats to the Clarity Act. Senate Majority Leader John Thune said Thursday evening that the bill would be taken up when senators return from the August recess, pushing the next vote into mid-September.
As of Thursday afternoon, Senate Majority Leader John Thune, R-S.D., had not filed for a cloture vote, the procedural step required before the Senate can move toward a final vote on the legislation. Filing cloture before the recess would allow the first procedural vote as early as Sept. 15, while filing after senators return would push that step to Sept. 16.
The possibility of senators remaining in Washington through the weekend or into the following week is no longer the expected path. Thune said the legislation would instead be queued up when the Senate returns, leaving negotiators the August recess to work through disputes over ethics, decentralized finance and other provisions before a possible mid-September vote.
Even Senate approval would not finish the process. Any amended version would have to return to the House for another vote before reaching Trump’s desk.
The result is a delayed path to passage rather than an immediate pre-recess vote. Lawmakers now have until the Senate returns in September to resolve the ethics dispute, hold together Republican support and secure enough Democratic votes. The proposed Trump divestment rule may still determine whether the Clarity Act advances once the Senate takes the bill back up.
