Ethics Issues, Treasury Departure Together May Prove Fatal to CLARITY Act

On 3 Aug, Treasury Secretary Scott Bessent said that Tyler Williams, one of the Trump administration's principal negotiator with Congress on crypto, departed on 31 Jul. No specific reason has been given for the timing beyond his "expected return to the private sector." 

Meanwhile, opposition to several key parts of the CLARITY Act gained strength over two points. First, the responsibility of programmers and developers over how their work is used; and second, over matters of ethics, inflamed by the recent disclosure that President Donald Trump's earnings increased by more than $1bn from his crypto activities in 2025.

The CLARITY Act is a sweeping crypto market-structure bill that would establish a federal framework for digital assets, clarify the respective roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and set rules for exchanges, brokers, issuers and decentralized finance. The House passed its version in July 2025 and the Senate Banking Committee advanced an amended bill in May after months of negotiations involving lawmakers, banks and the crypto industry. The legislation still requires approval by the full Senate, where it would need substantial Democratic support to clear the chamber. 

Lawmakers have only a handful of legislative days remaining before the Senate begins its summer recess on 10 Aug. The bill could return in September, but the approaching November midterm elections and unresolved disputes could make passage this year more difficult. Supporters have warned that failure to enact the legislation in 2026 could force negotiations to restart in the next Congress and delay broader US crypto regulation for years.

Treasury's crypto negotiator 

Williams was viewed as key to gaining the necessary support to pass the bill. He joined the US Treasury in February 2025, when Secretary Bessent named him to lead the department's digital-asset policy efforts as part of the administration's wider crypto push. It was Williams's second stint at the Treasury: he served as deputy assistant secretary under Steven Mnuchin from 2018 to 2020, and worked congressional staff roles for Senator Thom Tillis and then-Speaker John Boehner before that. He came to the role from crypto financial services firm Galaxy Digital, where he was head of regulatory and legislative affairs.

At the Treasury, Williams worked on both the stablecoin bill that became the GENIUS Act - signed into law in July 2025 - and the broader CLARITY Act market-structure bill, which Bessent has pushed Congress to pass since April. 

On the stablecoin legislation specifically, Williams pushed for a light-touch approach keeping states, bank regulators and issuers under a single rulebook, which he called "a pretty good outcome" for Washington. Bessent, in his statement confirming Williams's departure, credited him as central to the administration's push to make the US the "crypto capital of the world."

The Treasury has not said who takes over his portfolio or explained why he is leaving now, both questions Sandmark has put to the department.

Provision everyone is fighting over

Losing Williams as a negotiator at this time is particularly stinging to the measure's supporters because the bill's single most contested provision, Section 604, is under fresh attack. Formally the Blockchain Regulatory Certainty Act, the provision would shield "non-controlling" software developers - those lacking both the legal right and the unilateral ability to control, initiate or carry out transactions involving users' assets - from being treated as money transmitters. 

The National Sheriffs' Association wrote to Senate leaders on 31 Jul, arguing the provision creates a blanket exemption that would let mixers, bridges and DeFi protocols evade anti-money-laundering rules. That letter has not yet been made public. Sandmark has requested a copy from the NSA, so what follows reflects the Blockchain Association's characterization of it.

The Association's rebuttal, an eight-page letter to Senate Majority Leader John Thune and Democratic Leader Chuck Schumer, argues that Section 604 applies only to developers who do not control users' funds, rather than to every person or business earning revenue from a crypto service. The group also said the provision would not shield anyone who does control assets, while still keeping existing money-laundering, wire-fraud, sanctions and forfeiture laws unchanged. 

The Blockchain Association also disputed the suggestion that law enforcement is united against the provision. The Fraternal Order of Police, the National Organization of Black Law Enforcement Executives, the Major Cities Chiefs Association and the Federal Law Enforcement Officers Association all back the bill, and Major County Sheriffs of America has dropped its opposition to neutral.

Part nobody has connected yet

The law enforcement fight isn't the only source of renewed hostilities. On 28 Jul, Democratic Senator Richard Blumenthal convened a hearing on ethics and perceived enforcement gaps in the CLARITY Act, at which New York Attorney General Letitia James submitted testimony arguing the bill would preempt states' ability to prosecute crypto fraud - the same preemption logic underpinning her $36bn suit against prediction markets platform Kalshi. 

Days later, per a CNN report, Blumenthal co-signed a letter with noted crypto industry foe Democratic Senator Elizabeth Warren asking the SEC to investigate whether Trump's memecoin constitutes an "illegal scam." 

Both moves land in the same week as the NSA letter and Williams's exit - and both come from senators whose votes the bill needs. Democratic senators Catherine Cortez Masto and Mark Warner have each said their support hinges on law enforcement concerns being resolved. Neither has indicated whether the Blockchain Association's rebuttal addresses those concerns.

Where the numbers stand

Thune told Bloomberg on 3 Aug he still expects an initial procedural vote before the window closes when the Senate leaves for recess on Friday. The bill needs 60 votes, meaning seven Democratic crossovers, but a bipartisan ethics compromise sent to the White House last week has not yet been accepted.

What we're waiting on

Sandmark has asked the National Sheriffs' Association for a copy of its full letter and its response to the Blockchain Association's rebuttal, the US Treasury who will take over Williams' portfolio, the Blockchain Association for its assessment of support for the bill and the offices of Cortez Masto and Warner for their current positions. This article will be updated with any responses.