Unchained - Kristin Smith on Why the Clarity Act Comes Down to a Memecoin

Episode Date: July 28, 2026

Kristin Smith walks through the vote math, the ethics fight, and what happens to crypto capital if the Clarity Act stalls before the midterms. The Senate needs 60 votes to pass crypto's market structure bill, the Clarity Act, before an August recess deadline just weeks away. Majority Leader John Thune says the votes likely will not be there in time, and Polymarket puts the odds of passage this year at roughly 30 percent. Kristin Smith, President of the Solana Policy Institute, joins Laura Shin to explain why a deal that seemed close has snagged on ethics language Trump agreed to but Senate Democrats do not trust the Department of Justice to enforce. Smith walks through the vote math behind 53 Senate Republicans and the Democrats who backed last year's Genius Act, the Blockchain Regulatory Certainty Act's protections for developers, and the new commodities pathway for token launches. She also maps where the sidelined capital goes, from the Middle East to Japan, if Clarity misses its window before the midterms. Host Laura Shin - Founder, CEO and Host of Unchained Guest Kristin Smith - President of the Solana Policy Institute Sponsor Cape: Your biggest crypto vulnerability isn't your wallet, it's your phone number. Cape is America's privacy-first mobile carrier that rotates your SIM identity daily and blocks SIM swaps before they happen. Get 33% off your first six months at https://cape.co/unchained   (use code: UNCHAINED). Timestamps: 🗳️ 00:41 Why Clarity's Senate timeline looks so tight before the August recess 📣 09:11 Cape: Get 33% off your first six months with code unchained at https://cape.co/unchained ⚖️ 10:10 Why Trump's ethics language deal became Clarity's toughest sticking point 🏛️ 18:21 Kristin Smith on the Clarity Act provisions that most excite the industry 🌍 23:18 What happens to crypto capital and global leadership if Clarity fails Learn more about your ad choices. Visit megaphone.fm/adchoices

So it's really coming down. It's coming down to a meme coin, guys. Like, this is where we're at, which is kind of wild and in some ways hilarious. Hi, everyone. Welcome to Unchanged. You're no hype resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this live stream.

And we will first take a quick word from the sponsors who make this show possible. This episode is brought to you by Cape, America's Privacy First Mobile Carrier. Same premium service you'd expect from any other carrier. but designed so your number, your location, and your data actually stay yours. Get 33% off six months at cape.co slash unchained. Today's guest is Kristen Smith, president of the Salonah Policy Institute. Welcome, Kristen. It's great to be here, Laura.

Great to have you. Oh, my gosh. This is just, it's like crunch time. This is something the industry has been looking forward to for, many years. And last week, there was sort of a flurry of news about the Clarity Act. And it's facing not only a very tough timeline, but as far as I can understand, very tough vote math to be passed in 2026 at all, let alone before the midterm. So, you know, some of the things I saw were Senate Majority Leader John Thune said that clarity will likely not have enough votes before the August recents begins.

I noticed Polly Market odds are at about 30 percent. But before we were, we're going to be able to we get into all the details about, you know, what's in it, what the sticking points are, things like that, just give us a sense of this timeline. Why does it look so tricky? Why does it look like the clock might run out? Yeah, well, there are only so many legislative days in a year, you know, in crypto, we have scarce digital assets. There will only be 21 million Bitcoin. And in Congress, there will only ever be a certain number of legislative days and hours every year. And, you know, to get a standalone bill signed into law, there are multiple procedural votes and it takes up quite a bit of time to get it through the actual Senate floor. I think if you recall last year with the Genius Act,

Genius took about four weeks, but that included some failed procedural votes along the way. And so with clarity, we need to condense that. We need to be able to move it faster and quicker. But I think the good news is the number of issues remaining are very few and very small. And so hopefully we can get those worked out, get the process kicked off and, you know, wrap this up next week before they leave. You know, the thing to know about this bill is that you need 60 votes in order for it to pass. And the reason you need 60 is because in the Senate, any single senator, can stand up in filibuster legislation unless you get this 60 vote threshold in order to end debate and limit it to a certain number of hours. And so that 60 number is very important.

You know, we have 53 Republicans in the Senate right now. One of those is Senator McConnell, who's not actively voting. You have a couple of those that, you know, may or may not, haven't decided where they're at yet. So we're going to need a good number of Democrats to join with Republicans to have that critical 60 votes to get this signed into law. And so that's where the leverage comes in. That's where the, why the negotiations are happening between both sides. But I think we're getting very close. And I'm very optimistic we can get this done. Okay. And before we get further into the vote math, I just want to understand. So, you know, one of the deadlines is the August 7th recess. But then what happens after that? So if we're looking to

try to pass this in 2026, or, you know, one of the deadlines, is the August 7th recess. But then what happens after that? So if we're looking to, or before the midterms, then kind of what are the remaining windows? Yeah, so this window we have right now before the Senate recesses for the August work period is the most critical window. I think we really want to see substantial action in the Senate. We'd like to see it get all the way through this August because what happens is, is Congress doesn't come back until September. The House and Senate are on slightly different schedules, but they're only in for a couple of weeks in September. And September is a very busy time in D.C. because the government funding expires on at the end of September. There are things like the

National Defense Authorization Act that needs to be, you know, redone every year. And, you know, you mix in a bunch of Jewish holidays. There just aren't a lot of days for voting in September. So very, very limited time there. Then they go home for the month of October leading up to the early November election. And then it's a complete wildcard what happens after that. That's the lame duck period between the election and when the new Congress is sworn in. That's the November, December timeframe. Sometimes those are incredibly productive and they get a lot of things done.

Sometimes, particularly when there's a change in the balance of power in one of the houses, they oftentimes, you know, decide to pack up and go home. So we really need to get this through the Senate now, kick it over back to the House so the House can move quickly in September, which the House, because of the way the rules are structured, they can move more quickly than the Senate. And then from there, it's off to the President's desk for signature. Okay, okay. Wow.

So, yeah, this looks like really tight math. So now let's go to the vote math. You already mentioned so Mitch McConnell isn't voting. And so if there is usually 53 Republicans, then that sort of knocks the number down to 52. But I don't know. Do all of the Republicans support clarity? Or is there even a question there? I think most of them support clarity.

There is an open question from a couple of the members. If you look back at the genius. vote. You had Rand Paul and Senator Holly. Both of them did not vote for Genius. It's unclear if that will be the same case or not with clarity. But regardless, you're going to need, you know, somewhere between eight or more Democrats on board. I think the good news is, if you look back to Genius, there were 18 Democrats that ultimately ended up voting for that bill. And you have a really active block of seven or eight of them in the Senate that are actively involved in the negotiations. And so I think if you can get that block, they will bring with them another 10 or so members.

And so I think that, you know, it's definitely possible to get the 60 votes needed, but we need a couple of things. Most importantly, we need to strike a deal. Well, not we, the industry, but we need the Senate and the White House to come up with a deal on ethics language. We also need to get a deal around the Blockchain Regulatory Certainty Act. There are a couple of these little outstanding issues that need to happen. But I think if they can get a couple of these things off the table, that should be enough for them to move forward with a vote and, you know, hopefully have the votes to get this signed into law. Okay. And for any members of the audience that are interested in reaching out to their senators. I wondered if you had any specific names you wanted a drop of Democrats, that

seemed like they would be movable. Yeah. I mean, listen, I think, you know, there's a group of seven of them that I think are very involved in any negotiations that senators, and I will probably miss one, also Brooks, Gallego, Warner, Warnock. Jillibrand was not on the letter with them, but she's heavily involved as well. So, you know, there are, I think any of those 18 senators, when I don't have the list in front of me, that did that, voted before, I think our fair game targets again. But I think, you know, listen, there's some great tools out there if you want to message your congressman or senator. If you go to stand with crypto, they've got tools on their website, the Blockchain Association, also my former organization, put out a tool as well

that you can generate your own letter and get it sent over. So very easy to do. And I think, you know, regardless of who your members of Congress are on the Republican side or the Democratic side, you should be weighing in with those members because, you know, we want to make sure all the Republicans show up and absolutely as many Democrats as possible get the message that we have to get this done. Yeah, I actually used that tool. It was a great little tool, so I recommend people looking at it up. Okay, so in a moment we're going to talk about this compromise that needs to happen around ethics, but first we'll take a quick word from the sponsors who make this show possible. If you hold crypto on your phone, your biggest vulnerability isn't your wallet. It's your carrier.

AT&T, Verizon, and T-Mobile have been breached again and again, and sim swaps are still one of the easiest ways for attackers to drain accounts. That's where Cape comes in, America's Privacy First Mobile Carrier. Sane Premium Service, but Cape rotates the identifier on your SIM every 24 hours, deletes your call-and-text metadata after a day, and protects against SIM swaps with a 24-word recovery phrase that only you control. You also get two middle-to-end encrypted secondary numbers for banking and sign-ups, so you stop handing your real numbers. number to every app that asks. Go to cape.co slash unchained and use code unchained for 33% off your first six months. Back to my conversation with Kristen. So there was a new draft that included this

new ethics language that the Democrats originally wanted, but the language was something that they were actually not happy with. So tell us what this ethics language says and why it remains a sticking point. Yeah. Well, first of all, I do think the inclusion of ethics language that was signed off on by Trump was a very big deal. I think the fact that he agreed to something like this is highly unusual. You know, most asset classes don't have their own specific ethics provisions that go along with them. And in fact, most presidents don't impose any kind of restrictions on themselves. So I think the fact that he agreed to this is incredibly significant and really can start off a negotiation.

You know, essentially he agreed to no issuing or sponsoring of digital assets with, you know, divesting those assets or putting them in a blind trust if they already have them, and that the Department of Justice can enforce them with civil penalties. So this is much stronger than anything that has ever existed before. And so I do think it is actually a pretty good starting point. I am also, though, not surprised that the Democrats would be like, oh, we will take exactly the first offer we get from Donald Trump. You know, the Democrats are also incredibly good negotiators. And so they're having conversations right now with a small group of them along with Senator Tillis from North Carolina, who is a Republican who's not running for re-election and has, you know, not been afraid to push back against Donald Trump.

You know, they're talking, they're working on coming up with something. But, you know, this is a language that is going to apply to every member of Congress as well as the president and the vice president. So I think they're trying to find a path forward. I think it's going to come down to sort of the enforcement mechanism around this and maybe a couple other details. But, you know, from my conversations on the Hill, these are very, very active negotiations. I think they're very, very, very close. And, you know, I think it's, you know, if you look at the politics of it, I think it's in the best interest of the Democrats to come back with something, right? Like, they're, they're going to be put in a tough position if, you know, Trump has said, hey, I'm willing to do all these things. And their answer is no. So I think they will come back with something. And if it is workable and reasonable, I think that, you know, Donald Trump, I think wants to get this done. I think he wants the U.S. to be the crypto capital of the world. He wants a win. And so I think that the politics could be in our favor, you know, if we can get some language moving back and forth here in the next 24, 48 hours.

One of the pieces that the Democrats objected to was that the Department of Justice would be in charge of policing. Why was that something that they didn't like? Yeah, well, you know, the president appoints the, or nominates the Attorney General to run the Department of Justice. So the concern has been that, you know, that attorney general might not, you know, be willing to go and push back against a president who, you know, put them there. And so there have been some discussions around what other kinds of enforcement mechanisms could come into play. There's been some discussion that maybe the state attorneys general would play or role there. but you start running into some sort of almost constitutional issues with, you know, the power of the states versus the power of the federal government. And so there are discussions going on to try to find some

middle paths there. And I'm optimistic there are, I mean, this is definitely outside of my area of policy expertise, but my understanding is there have been a lot of really creative solutions that have come to the table. And I'm hopeful that, you know, that they can find one that works for all parties involved. Because if, you know, listen, if this is really truly an issue for Democrats, which I think it is, like I think they're going to want to do something about it. And this is an opportunity for them to put something in place that prevents, you know, the kind of activity that they, that they find objectionable from happening going forward. And one other piece that I didn't understand was that the proposed ethics clause will end in 2029. But

does that mean then this or what Trump is proposing is an ethics class that only applies to him and to no other president? Or I didn't fully understand like why that was part of the clause. I think that the date is open for interpretation or open for negotiation right now. And so that could be some of the changes. But yes, it would essentially, you know, free up Trump to do what he wanted after leaving office is my understanding. And so, yeah, I think this is one of the issues that is that is open and part of the negotiations. I would say, though, I think one kind of maybe frustrating thing from the industry is that, you know, this is a bill that is designed to regulate the crypto space. And, you know, what government officials, like the activities that they do are, you know, it's very different than how to regulate a, you know, spot exchange or something like that.

And so, you know, the industry doesn't really have a seat at the table. You know, we're not in the room for these negotiations. We don't really have a dog in the fight other than we need an agreement on this issue in order to get the votes needed to get this bill done. So it's a little bit of a tough issue because, you know, we're not in the room for it and we're not seeing, you know, the language and the proposals like we might with some of the other sections just because we're not really a party to the negotiations. Right. So it's basically like the Democrats and President Trump are having a fight and our bill is being held hostage. This reminds me of something that happened earlier having to do the banks. But anyway, yeah. Yeah. So one last thing. And I know it's probably going to change. But I'm just curious. So let's say that it goes through as it's proposed. Then what would that mean? for Trump's crypto businesses while he's in office. Oh, no, I guess you answered it. They would go into a trust or he'd divest. But then after the class expires, then he could resume as presumably, okay, okay. That's my understanding.

Okay. So, okay. The confusion point for me was I thought he was saying it shouldn't apply to any other president. So that was why I was asking about the 2029 number or the 2029 date. But okay. So do you have a sense of. what it is that the Democrats want and whether or not Trump or the Republicans would be open to any of that?

I mean, I think that's sort of the big question. I think they want to have some sort of enforcement mechanism that's outside of the DOJ. And so I don't know what the answer to that is, but I think they're looking at some creative solutions there. And I think the big question is, can they come up with something that, you know, Trump will sign off on? So it's really coming down. It's coming down to a meme coin, guys. Like this is where we're at, which is kind of wild and in some ways hilarious. It's like the original sin of him being reelected.

Yeah. But listen, you know what? We can complain about this all day long. I would take an enthusiastic Donald Trump who loves crypto so much that he wants to be in the business over, you know, fighting Gary Gensler any day. So this is like a way, way better position to be in. But yeah, it is a bit of a comedy for sure that it's all come down to this. Okay. So now let's talk about the meat of clarity.

What are the main provisions of clarity that you feel the crypto industry can be most excited about? Yeah. So listen, I mean, I think what we can be most excited about is like in total that this will provide a framework that really allows for the adoption of digital. assets on a more mainstream basis and I think the integration of the traditional financial world with the crypto world. And so I think it's really the impact of like, you know, there's all these institutions that are sitting on the sidelines that are maybe thinking about upgrading, maybe they want to use salana for something where they're not sure. There's also asset allocators that want to come in and invest. When we have this framework that's going to unleash a lot of

capital and a lot of activity. And I think that is what is most exciting to me. But there are some parts of the bill that I think are really, really positive for the crypto industry. One of those is the Blockchain Regulatory Certainty Act, which provides protections for software developers so that they're not treated as money transmitters. I think that that is really important. And then there are other parts of the acts that, you know, might be a little bit onerous, but I think provide that sort of path forward. So, for example, you know, the exchanges would be subject to market regulation, which today there's no spot, you know, regulator for crypto.

So, you know, that will be, you know, something that certain entities will have to, you know, comply with, but I think it will have the impact of expanding the total market. You know, the other one issue that we've talked about many, many times in the past is that, you know, we haven't had a clear pathway for new crypto assets to launch in the United States. And so this provides a regime where, you know, those assets are declared to be commodities. However, they're still subject to some security-like disclosures. And so, you know, it's, again, it's not the wild west of the, like, 2018, like everyone's issuing white papers and making tokens, but there's a framework to move forward.

And so, you know, I think that's why they call it the clarity. Act, it provides, you know, sort of this clarity for how to operate, how to make sure that, you know, businesses who want to, you know, come into the U.S. or start up in the U.S., they know what the rules are and they can move forward. So, you know, really huge opportunity. And I would say the bill, you know, we've gone through several versions of crypto market structure legislation over the past, you know, eight years. And a lot of them have, you know, been early drafts. They weren't really super well thought out. But through that process over time, you know, we're now at 600 plus pages of legislation. And, you know, there's been a lot of the

details have have been worked out. And I would say, you know, most of it, you know, 99% of this is agreed to right now. It's just those, you know, a couple little remaining issues that we need to get across the finish line. But again, active conversations going on. And I think that you know, there's a real chance we can get this done next week. Yeah, I think the Blockchain Regulatory Certainty Act, the way that it protects developers for working on non-custodial projects, I think is something that a lot of people will really care about. But I'm curious, are there any provisions that give you pause or that you think at least the industry will have that feeling about?

Yeah, I mean, listen, there's some stuff in there that quite very, Frankly, I think a few years ago, we, we, even though things were bad, we probably would not have agreed to, but, you know, we're in, we're in a new spot. I mean, just the disclosure regime alone is, you know, substantial. So that is something that I think, you know, we will work through. There will be a pathway, but it doesn't mean there, there's no work there. You know, I think we also have this whole section, you know, for those decentralized and name only projects. projects. You know, I think, again, a few years ago, this might not be something people were comfortable with. But, you know, I think there's just been this realization that this is the only viable path forward to do this on any large scale. And so, yeah, listen, like some of this stuff is going to be hard to deal with. It's going to cost money. You're going to need lawyers. You're going to need compliance. But at least there's a path forward, which we've never fully had before. And it will probably be a lot easier than engaging in litigation with the SEC or getting, you know, debanked by. by the banking regulators or whatever else. So, yeah, some of these things I think, you know,

when push comes to shove, it's going to take a little bit of work, but again, better than the alternative we've been living in in the past. Okay. So I hate to end on a slightly negative note, but I think it's important to ask, if clarity doesn't pass this year, then walk me through kind of what you think that might look like in terms of when might be the next best, best, you know, chance for it to pass or, or essentially what you think will happen. Yeah, I mean, so I don't think all hope is lost if it doesn't pass. I mean, I do think that we have the, you know, really strong regulators at the SEC and the CFTC that can move forward with developing rules that fit within authority that they currently have, not any new authority,

but the rules they currently have. So I do think we can see, you know, some progress. But, yeah, I think it's going to be a step backwards for the U.S. I think, as I mentioned before, there's a lot of money sitting on the sidelines that, you know, wants to enter this space, you know, either directly as an investment or through upgrading the technology. And I think some of that, you know, won't come to fruition if we don't get this built done. So I do think it's hugely important.

I think we're at this big inflection point as an industry. Like this is the time to get something like this done. And I cannot tell you, Laura, there have been thousands and thousands and thousands of hours between staffers and senators and members of Congress in the White House. Like there's been so much time and effort put into this bill. It is ready to go. I think there have been a lot of, you know, improvements and changes over time. We should be able to get the votes. can close out these couple little issues. And, you know, I do think there's time left. They may have

to extend a little bit past August 7th. They might need to get into the, you know, 8th, 9th or 10th, but I've heard, you know, there are folks on the Hill that are talking about that as a possibility. So, you know, this is definitely something that can get done and is not a guarantee it gets done. But the pathway exists. And I think, you know, all the, oh, my colleagues on the industry side who are working on the ground in Washington, you know, it is, uh, All hands on deck folks are on the hill. They're talking to media. They're helping get letters together, et cetera. It is a full-blown lobbying effort right now. And, you know, I'm, I think we've got great people that are working hard and hopefully we'll succeed in getting this done. Actually, that's something I didn't understand about the clock. So they can actually push it past the seventh? They can. They can. The calendar is not set in stone. So, I mean, even today we, or I guess it was maybe late last night, we have had Donald Trump saying that they should cancel, Senate should cancel the August recess so they can do the Save America Act, right? So, you know, they do have an option of changing, of changing the days. Oftentimes what happens is sometimes they'll go home early because they finish their business. But there's a, there's a long to-do list in the Senate right now. And,

It's tricky to maneuver things. They have a bunch of nominations. They need to get done, et cetera. So I do think the option of extending a couple days is on the table. Ah, okay, okay. And one other thing, you mentioned all the money that's waiting on the sidelines for clarity that people are hoping to deploy here in the U.S. If that doesn't happen, if it doesn't pass this year,

do you have any sense of where that money will go? I don't have a sense. It seems like everyone wants to go to like AI these days or do things that are outside of crypto. But no, I do think there is a lot of, I think there's a lot of interest in crypto, at least among, you know, allocators I've spoken to. But actually what I meant was like other countries. I don't know if there are other jurisdictions that people are looking at is, you know, where kind of the crypto industry can flourish. Yeah, yeah. No, I mean, listen, I think that, you know, the Middle East is still a spot that, you know, despite some of the, you know, geopolitical issues they're having over there. I think there's still a lot of interest over there right now.

I think Asia is, you know, another place where, you know, Japan is like putting out a framework right now. And so, yeah, I think there are other parts of the world that are more interested in investing. But, you know, what's really cool about what the Genius Act did last summer is we're now seeing different jurisdictions around the globe that are looking to that, that are trying to modify their own roles. And I think if the U.S. can be the leader with the Clarity Act, I think we're going to see other jurisdictions around the globe kind of copy our framework. And so, you know, I want the U.S. I'm a U.S. Simpson. I want the U.S. to be a leader. I want the U.S. to, you know, set the standard for everyone else to adopt globally and, you know, be the ones that are

that are using this technology, you know, first and being most effective with it. So, but no, I think there will be some, you know, other activity around the globe. But, but, you know, the U.S. is still, I think, kind of the crown of prize and we want the U.S. to be actively engaged as well. Yeah. I would agree with that. I tweeted that my worry is if we're not the leaders in this technology, then it will upset the global balance in some way that does not seem positive to me. So that's why. Yeah, yeah, yeah. I think you're, I think you're right.

So, yeah, we want the U.S. to be in the game. Okay. Well, Kristen, as usual, it was such a pleasure chatting with you. Thank you so much for coming on Unchained. Yeah, thanks for having me, Laura. And thanks to everyone for tuning into this live stream. We will catch you tomorrow. Bye now.

Nothing you hear on Unchained is investment advice. This show is for informational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit Unchained Crypto.com.