CLARITY Act faces turbulence as Trump's crypto ventures draw scrutiny during House hearing

Prospects of passing a bill to regulate the cryptocurrency industry at large are hitting a recurring roadblock—President Donald Trump's entanglement with the sector.

Some Democrats at a House Financial Services Committee hearing raised issues with Trump's involvement in crypto.

"The president has put us in a position where his actions are so egregious that we have no other choice but to focus on him today, and it is a distraction," Rep. Gregory Meeks, D-N.Y., said. "I wish I could be just talking about the bill responsibly so that we could try to make sure that we could push this thing forward."

The hearing was focused on a bill called the Digital Asset Market Clarity Act, known as CLARITY. Committee Chair French Hill, a Republican, introduced the 236-page bill last week, which looks to create a clear regulatory framework for crypto in part through designating how the Securities and Exchange Commission and the Commodity Futures Trading Commission will regulate. The bill also requires digital asset firms to provide disclosures to customers and segregate customer funds from their own. The House Agriculture Committee held a similar hearing on Wednesday.

The Clarity Act has some Democratic support from Reps. Angie Craig, Ritchie Torres, and Don Davis.

Meanwhile, Trump's involvement with crypto via the debut of Trump-backed World Liberty Financial and later the launch of its own stablecoin, to the president's decision to put forward a memecoin and host a dinner for the top holders has repeatedly drawn scrutiny from Democrats. At one point, House Financial Services Committee Republican Chair French Hill said that Trump's crypto moves complicate efforts to pass a separate bill focused on stablecoin regulation.

Rep. Andy Barr, R-Ky., accused Democrats of launching a political attack against Trump.

"I just have to first address this red herring that my Democratic colleagues continue to push, this carelessly thrown out accusation and this baseless politically motivated attack against President Trump, that his support somehow for a regulatory framework for digital asset market structure is somehow corrupt, that he's personally profiting from our agenda to bring clarity to the stablecoin and market structure," Barr said.

Rep. Jim Himes, D-Conn., who is viewed as neutral toward crypto, pushed back against Barr, calling his statement "ill-advised and a cheap shot."

"Those of us who might be inclined to support this thing so that it can be bipartisan are not going to add our names to something that is associated with the rank corruption that we see out of the White House," Himes said.

Conflicts of interest language should be added to the bill, along with other provisions, Himes said.

"Without that, I am not a yes vote, and I'm going to encourage every Democrat to be a no vote," Himes said.

Throughout the hearing, lawmakers also delved into specifics about the bill, including how decentralization should be defined and whether there were sufficient anti-money laundering parameters in the proposed bill.

And another hearing could be incoming.

During the hearing on Wednesday, Waters called for a "Minority Day Hearing" with a fresh set of witnesses to get more details on the bill and Trump's crypto links. In a statement, Waters also said that the committee may consider the Clarity Act "as soon as next week."

On the Senate side, Sen. Cynthia Lummis, R- Wyo., told Bloomberg on Tuesday that work on a market structure bill would "begin" next week.