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Negotiations led by the White House on the Clarity Act ended on Monday without reaching an agreement, as representatives of the cryptocurrency industry and the banking lobby failed to resolve their differences on stablecoin returns, and a new investment of $ 500 million by an Emirati official in the cryptocurrency company of Donald Trump’s family threatens to complicate the chances of the bill’s passage.
The Clarity Act is designed to bring regulatory certainty to the US cryptocurrency markets. Instead, the law has become entangled in a conflict of interest controversy that could derail the primacy of former leaders in the cryptocurrency space — and could strengthen the future of digital finance at the same time.
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The return dilemma
Patrick Witt, the Cryptocurrency Board of the host president The meeting At the Eisenhower Executive Building, he gathered representatives from Coinbase, Circle and Ripple, as well as banking trade associations. After more than two hours, the participants left without an agreement on whether cryptocurrency exchanges should offer returns on stablecoins.
The participants of the cryptocurrency sector, who significantly outnumbered the bankers, felt that the banks were dragging their feet. The White House ordered the two parties to reach an agreement by the end of the month.
The stake seems huge. A Treasury Department analysis estimated that up to $6.6 trillion in deposits could move from banks to stablecoins if returns were allowed. Banks have warned that this could create an unregulated parallel financial system; While officials in the digital currency industry respond that banks are just afraid of competition.
The dispute escalated in January when Coinbase CEO Brian Armstrong made an announcement He withdrew his support for the projectsaying that he would rather have no legislation than have defective legislation.
The agreement with the UAE casts a shadow
The Wall Street Journal reported Sheikh Tahnoon bin Zayed Al Nahyan – the UAE’s national security adviser and head of its $1.5 trillion sovereign wealth fund – acquired a 49% stake in World Liberty Financial, the Trump family’s cryptocurrency company, just four days before the inauguration.
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Ethics observers denounced the deal as a clear conflict of interest and a potential violation of the Constitution. The timeline raises questions: Trump hosted Tahnoon for a dinner at the White House in March; Facilitated World Liberty’s USD1 stablecoin A $2 billion investment from the UAE in Binance In May; Just two weeks later, the administration approved the export of 500,000 artificial intelligence chips from Nvidia to the UAE, overturning restrictions imposed by Biden during his presidential term.
The paradox of clarity
Herein lies the irony of the core: If the Clarity Act passes, it will regulate all US stablecoins, including the USD1 coin of World Liberty. Trump himself will sign the rules that regulate his family’s businesses in the cryptocurrency market. Any position management assumes returns will have a direct impact on the competitiveness of USD1.
Democrats had already called for the inclusion of anti-corruption provisions before the UAE deal came to light. Senator Elizabeth Warren declared that the situation was a clear corruption and demanded action from the Congress. With Republicans controlling both chambers, formal investigations remain unlikely.
Narrow road
The bill has passed the House and Senate Agriculture Committees, but must also pass the Senate Banking Committee. Democrats have lobbying power here, and their demands go beyond ethics provisions to include full appointments to the CFTC and strengthened anti-money laundering protections.
New York prosecutors charged in a letter that the law adds another complication, allowing stablecoin issuers to profit from fraud by keeping stolen funds instead of returning them to victims.
In Davos, Trump promised to sign market structure legislation soon. But the combination of tight revenue, ethics concerns and UAE statements made this timetable increasingly unrealistic. Bitcoin’s 40% decline since its peak in October reflects the growing uncertainty.
The Clarity Act aims to provide clear rules for cryptocurrency markets. Instead, it became a study in how presidential conflicts of interest can obscure even the clearest legislative intentions.
