78 Democrats support CLARITY Act despite ranking member Waters' criticism

A day after a dispute among Republicans delayed floor action on a trio of cryptocurrency bills for most of two days, the House on July 17 passed a sweeping bill (HR 3633) establishing a framework for market regulation of digital assets. The vote was 294-134, with 78 Democrats joining all Republicans in voting for the bill. The House on Thursday was also expected to pass a Senate-passed stablecoins regulation bill (S. 1582), clearing it for the president's signature, and a third bill (HR 1919) that would block the Federal Reserve System from studying or implementing a central bank digital currency (CBDC).

On July 15-16, a group of conservative Republican members who sought to merge the CBDC bill with HR 3633 had blocked passage of a rule governing debate on the crypto bills, freezing the House in place until late in the evening while GOP leaders tried to find a solution. In the end, leaders and the GOP faction agreed to add the CBDC bill to the must-pass National Defense Authorization Act (NDAA) later this year. The vote on the rule was held open for nine hours, breaking the record of 7 hours 24 minutes that had been set just two weeks earlier with a vote on the massive budget-reconciliation bill.

HR 3633, the Digital Asset Market Clarity Act, or CLARITY Act, is sponsored by Financial Services Committee Chairman French Hill (R-AR) and Agriculture Committee Chairman Glenn Thompson (R-PA), along with several original cosponsors. The bill would establish regulations for key issues surrounding the trading of digital assets, including what constitutes a commodity or a security and which regulators would oversee different kinds of products. Notably, because House Financial Services Committee Republicans did not have the opportunity to bring their own stablecoins regulation bill to the floor and instead accepted the Senate's bill (S. 1582) without changes, HR 3633 includes a group of provisions that would reopen the stablecoins bill after it becomes law. Presuming these provisions remain in the final market structure bill that is expected to be considered this fall, after the Senate processes its own version, these would make changes related to nonfinancial stablecoin issuers, commodity-backed stablecoins and accounting requirements for issuers (see summary below).

A similar crypto market structure bill from the previous Congress, the Financial Innovation and Technology for the 21st Century Act ("FIT21"), passed the House in May 2024 by a vote of 279-136, with 71 Democrats in support. This year's version also attracted significant support from Democrats despite opposition from Financial Services Committee Ranking Member Maxine Waters (D-CA), who said HR 3633 "should be called the CALAMITY Act … This bill would lead to increased investor harm, plant the seeds for the next financial crisis, and endanger our national security." Waters said the former chairman of the Commodity Futures Trading Commission (CFTC) last week "warned that this bill would allow traditional companies, like Apple or Google, to evade securities laws."

Additional information is available in the attached WCEY Alert.

Text of HR 3633 is attached below.