The United States has moved towards re-blocking legislation around the regulation of encrypted assets. The lack of agreement on ethical rules and article 604 in the multi-party negotiations led to a cooling of expectations for the Senate to adopt the relevant bill.
Law enforcement agencies oppose Article 604
Four law enforcement organizations have recently sent letters to government officials requesting a re-examination of the relevant articles in the CLARITY Act. In their view, article 604 might leave a regulatory gap that would reduce the ability to investigate and prosecute crimes related to encryption.
These organizations are also concerned that the bill's requirements for KYC and AML, which are partially encrypted participants, are not sufficiently stringent and may allow them to avoid the compliance obligations normally imposed on traditional financial institutions. The report mentions that the United States National Police Brotherhood and the United States Association of Police Organizations, which participated in the previous discussions, did not sign the letter.
Negotiations in the Senate stalled
Closed talks between Senator Kirsten Gillibrand, Ruben Gallego, Bernie Moreno and Cynthia Lummis reportedly ended without agreement. The Republican and White House sides withdrew a programme that would have allowed the State Attorney General to challenge ethical law enforcement in relation to Trump ' s encryption interests.
The Democrats subsequently rejected another alternative, which gave the United States Attorney General sole executive power. As law enforcement agencies continue to oppose article 604, the difficulty of moving the bill forward has further increased.
The threshold is still high.
Clarity Act requires 60 votes in the Senate to pass. The Republican Party anticipates that it will still need to enlist the support of at least seven Democrat parliamentarians, but some of the Democrats who have previously expressed their support say that the problem remains unresolved.
The market's judgement about the future of the bill is also weakening. Polymarket shows that the probability of passing has dropped to 48 per cent and is about 74 per cent a month ago.