Coming off its Fourth of July break, Congress returns to Washington next week ready to take up ambitious cryptocurrency legislation before the midterm election calendar takes over.

Almost a year after the House passed its version of that bill, called the Clarity Act, it's the Senate's turn to pass legislation. The Senate Banking Committee and the Senate Agriculture Committee passed their respective versions this past year, and legislative counsel are in the process of combining those, a crypto industry source told The Block.

Two sources who spoke with The Block said that the text could come out as soon as next week.

The timeline is tight. The Senate has the remainder of July and the first week of August to bring the legislation to the floor. If the chamber approves the bill, it would still need another vote in the House, which is scheduled to begin its August recess at the end of July. Once lawmakers leave Washington, focus is expected to quickly turn to the November midterm elections.

Hurdles

Over the past year, the Senate has hit hurdle after hurdle as it tries to iron out issues, including a provision that creates a safe harbor for non-custodial developers, clarifying that they are not money transmitters.  The crypto industry has said the provision provided much-needed legal certainty for software developers and helps prevent innovation from moving offshore. Meanwhile, some law enforcement groups and even Catholic leaders have warned that it could weaken safeguards to combat human trafficking and could hinder investigations.

Earlier this week, Democratic Sen. Ron Wyden, an original cosponsor of the provision, sent a letter to Senate leadership to preserve that section in any future version of the Clarity Act. The  crypto industry source said, "talks [are] moving the right way."

Another unresolved issue is whether to include ethics restrictions. Lawmakers have said that without it, they won't support Clarity. Negotiators from both parties have spent months discussing ethics provisions that would limit how presidents, vice presidents, members of Congress and other federal officials can profit from digital assets while in office.

The crypto industry source said 70 pages of bill text, focused on being "pro-consumer," have been added at the request of Democrats, though it's unclear how ethics is a part of it.

On Friday, a group of Democratic senators, including Sens. Wyden and Elizabeth Warren, released a joint statement raising alarm about Trump's latest financial disclosures, ahead of passing crypto legislation. Last month, the Office of Government Ethics released Trump's financial disclosure report, which revealed hundreds of billions of dollars in bitcoin and ethereum tied to his family's crypto company called World Liberty Financial.

"The disclosures heighten concerns about the President pushing Congress to pass crypto legislation in favor of the very industry he’s cashing in on, the Administration’s moves to exempt cryptocurrencies and service providers from existing financial services regulations, and its steps to weaken enforcement, including by disbanding the Department of Justice’s National Cryptocurrency Enforcement Team," they said.

Despite those disagreements, Blockchain Association Chief Policy Officer Lindsay Fraser said lawmakers should use next week to resolve the remaining issues.

"When senators return next week, the focus should be on resolving the remaining technical questions and moving the Clarity Act to the Senate floor for a vote," Fraser said in a statement sent to The Block. "Months of bipartisan negotiations have produced a strong foundation, and we continue to believe there is a path to strong Democratic support once the final issues – including ethics provisions – are settled."

Next steps

The Clarity Act will be competing for floor time with several other legislative priorities, including appropriations measures and authorization bills.

One closely watched indicator will be the National Defense Authorization Act, annual legislation that Congress is expected to pass before the August recess.

"... whatever happens with Defense Authorization (NDAA), which is a must pass, will show us how floor votes are looking in July for every bill (including possibly Clarity)," the industry source said.

So far, Congress has passed one of its prioritized bills, the 21st Century ROAD to Housing Act, which includes a provision banning the Federal Reserve from issuing a central bank digital currency. However, Trump has said as recently as Friday that he would not sign that bill until a bill is passed that would tighten voting requirements in federal elections.

The deadline for Trump to take action on the housing bill is at the end of Friday, when he can decide to veto it; if not, it becomes law.

On the House side

If the Senate advances the Clarity Act, it still needs to get the House's sign-off.

On Friday morning, House Financial Services Committee Chair French Hill, R-Ark., told Fox Business that lawmakers have to get past concerns about ethics.

"If we passed the Clarity Act last summer, many of the things that people are expressing concern about — memecoin issuance, coinvestment, use of exchanges, investing in exchanges — all that would be under a market framework of regulation, with clarity, no pun intended, and that would provide a lot of transparency to people that are concerned about the Trump's family investments," he said.

Next Friday, the House Financial Services subcommittee on digital assets will hold a "field hearing" in New York, which Hill said will "highlight" why a crypto market regulatory framework is needed.