The crypto industry’s landmark regulatory framework faces collapse after the White House drew a hard line against ethics provisions targeting President Trump and his family’s extensive cryptocurrency business interests. Patrick Witt, executive director of the President’s Council for Advisors for Digital Assets, told CoinDesk on February 3, 2026 that the administration will not allow the targeting of the president individually or his family members,
calling Democratic proposals completely outrageous.
The Ethics Standoff
Democrats demand conflict-of-interest provisions preventing senior government officials from profiting off crypto holdings while in office. The push gained urgency after Bloomberg estimated Trump earned approximately $620 million from family cryptocurrency ventures including World Liberty Financial, a DeFi and stablecoin project listing Trump and his three sons as co-founders, and a 20% stake in mining firm American Bitcoin.
Senator Cynthia Lummis (R-WY), who has been negotiating with Democrats on behalf of the White House, revealed at the Blockchain Association summit in January that the White House kicked it back and said, ‘You can do better than this,’
rejecting proposed ethics language as unacceptable. Senator Ruben Gallego (D-AZ) told CNBC last week there is backsliding on ethics
provisions despite earlier progress.
The administration argues ethics concerns should not result in banning entire families from an industry,
according to Witt’s interview at the Ondo Summit. He maintained that reasonable guardrails are acceptable, but it will not agree to provisions that single out individuals or family members for blanket restrictions.
Democrats counter that without such restrictions, voters will perceive the bill as enabling presidential self-dealing rather than establishing neutral market rules.
The Stablecoin Yield Battle
Beyond ethics, the bill remains deadlocked over whether stablecoin issuers can offer yield to holders. Traditional banks lobbied intensively for restrictions, with over 3,000 banks signing a petition warning that interest-bearing stablecoins would siphon trillions from local deposits and lending. Coinbase, which reported $355 million in stablecoin-related revenue in Q3 2025, pulled support for the bill in January after Section 404 language would effectively ban its yield partnerships.
A White House meeting led by Witt on February 2 gathered crypto policy experts and banking industry representatives for over two hours in the Diplomatic Reception Room. Participants told CoinDesk the discussion represented exactly the kind of progress needed,
though banking representatives did not present compromises. The White House directed participants to make practical headway by month’s end on technical points, but they must still secure Democratic support beyond the Republican-driven Agriculture Committee approval.
| Stakeholder | Position | Key Demand |
|---|---|---|
| White House | No Trump family restrictions | Pass bill without ethics targeting president |
| Democrats | Ethics provisions mandatory | Prevent officials profiting from crypto holdings |
| Coinbase | Opposes yield ban | Protect $355M quarterly stablecoin revenue |
| Banking Industry | Ban stablecoin yield | Prevent deposit flight from traditional banks |
The Political Calculus
Democrats face pressure from their base to impose constraints on Trump’s crypto empire or risk attacks from the progressive left flank during 2026 midterm campaigns. Public Citizen watchdog group has dubbed the legislation the gryfto bill,
referencing Trump’s personal gains from the industry. An amendment creating ethics provisions failed along party lines during the Senate Agriculture Committee markup in late January.
Republicans counter that Democrats are weaponizing ethics concerns to sabotage pro-crypto legislation. The bill needs 60 votes to pass the full Senate, requiring at least 10 Democratic votes assuming all Republicans support it, math that becomes impossible if Democrats perceive the legislation as facilitating presidential conflicts of interest without meaningful guardrails.
Community reactions to the ethics deadlock reveal deep cynicism about congressional motivations. As one observer noted: seems like a pump fake. most of them insider trading anyways. What makes you think the democrats don’t also want to do profit off insider information with crypto?
Another stated bluntly: Regulatory clarity dies the moment politicians treat it like leverage for family business protections. Markets price in gridlock faster than hope.
What the GENIUS Act Already Did
The stablecoin regulation framework signed into law in July 2025 included provisions banning members of Congress and their families from profiting off stablecoins, but explicitly exempted the president and his family. PBS News noted this carveout came as Trump built a crypto empire from the White House, with World Liberty Financial receiving an early boost from a United Arab Emirates investment fund that the Wall Street Journal reported was secretly controlled by a UAE intelligence chief who purchased almost half the project.
The February Deadline
The Senate Banking Committee has not rescheduled its markup session following Coinbase’s withdrawal and the January postponement. Sources told CoinDesk that if the bill doesn’t secure a markup by late February, the chances go way down
for passage before 2026 midterm election season begins in earnest. Multiple sources described the current moment as do-or-die,
with only a two-week window remaining to resolve outstanding issues.
Additional Democratic demands include requiring the Commodity Futures Trading Commission to maintain bipartisan commissioner appointments and strengthening illicit-finance protections to prevent the sector from enabling criminality. Republicans argue these provisions represent partisan add-ons to what should be a straightforward market structure framework.
Industry Pressure and Campaign Finance
Fairshake, the crypto industry’s primary super PAC, announced February 5 that it has $193 million cash on hand for 2026 midterms, including nearly $75 million in new contributions from Coinbase, Ripple, and Andreessen Horowitz. Whether this financial firepower can overcome the ethics and yield deadlocks remains uncertain given that both issues involve core political constituencies—progressive Democrats demanding ethics enforcement and traditional banks protecting deposit bases.
The Blockchain Association’s CEO Cody Carbone told The Block in December that the window remains open for market structure legislation to reach Trump’s desk in early 2026 if committees advance a draft soon. That timeline now appears optimistic given the unresolved conflicts and approaching midterm electoral dynamics.
What Happens If It Fails
Collapse of the Clarity Act would leave the crypto industry operating under fragmented state-by-state regulations and continued SEC enforcement actions defining rules through litigation rather than legislation. The bill represents the most comprehensive financial reform in decades, addressing classification of digital assets, custody requirements, stablecoin frameworks, and DeFi regulation—none of which would receive clear federal standards without passage.
For Bitcoin and Ethereum specifically, failure would maintain the current ambiguous regulatory status where classification varies by context and enforcement depends on SEC leadership priorities. The industry’s massive lobbying investment and political capital expenditure would have failed to produce the clear regulatory framework that institutional investors cite as essential for large-scale adoption.
Witt expressed optimism that Democrats will propose more reasonable versions
of ethics provisions, but acknowledged the fundamental tension: At the end of the day, this is not an ethics bill.
Democrats view that framing as precisely the problem—a market structure bill that ignores conflicts of interest when the sitting president operates cryptocurrency businesses from the White House is not neutral market regulation but rather state-sanctioned self-dealing.
The next two weeks will determine whether negotiators find compromise language that satisfies Democratic ethics concerns without triggering White House rejection, resolves the stablecoin yield dispute between Coinbase and banks, and secures the 60 Senate votes needed for passage. If not, regulatory clarity for the crypto industry remains indefinitely delayed—a outcome markets are already pricing in through subdued price action despite pro-crypto administration rhetoric.
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