Senate Democrats Press CLARITY Act Over Illicit‑Finance Gaps

On May 14, Senate Democrats raised objections during a Senate Banking Committee markup of the Digital Asset Market CLARITY Act, arguing the bill leaves enforcement gaps on decentralized finance, Tornado Cash and stablecoins. They also pressed federal officials for an inquiry into World Liberty Financial.

Sponsors of the revised 309‑page draft include Chairman Tim Scott and Senators Cynthia Lummis and Thom Tillis. More than 130 amendments have been filed; Senator Elizabeth Warren submitted 44, including one aimed at political corruption in bank applications. The bill includes a negotiated stablecoin framework and added housing provisions as negotiators work to build support before the Memorial Day recess and preserve the chance of a floor vote this summer.

Democratic minority staff circulated an advisory that identified several areas of concern. The advisory flagged exemptions for certain DeFi activity, a provision its authors described as a Tornado Cash loophole, and what it called a stablecoin sanctions gap. The advisory also noted the bill does not adopt an international standard for determining which crypto platforms must implement anti‑money‑laundering controls.

Separately, Senators Elizabeth Warren and Jack Reed asked Treasury Secretary Scott Bessent and Acting Attorney General Todd Blanche to open a federal inquiry into World Liberty Financial. Their letter followed reports that the Trump family‑backed company partnered with a venture whose flagship project had been led by individuals sanctioned in October 2025 for links to a transnational criminal organization. The senators cited allegations that WLF sold tokens in 2025 to buyers tied to North Korean hacking groups, sanctioned Russian money‑laundering entities and other illicit actors, and they asked whether WLF vets partners, counterparties and users.

Warren and Reed requested written responses by May 26, 2026, on whether enforcement actions are under consideration for firms that lack adequate controls. Committee Democrats referenced open‑source intelligence, law enforcement warnings, industry analyses and government findings in laying out the alleged vulnerabilities.

The minority advisory wrote: “It must avoid creating new carveouts that can be exploited by sanctions evaders, terrorists, cartels, child abusers, and other criminals.” The markup is expected to shape which amendments move forward and whether the committee can report a bill to the Senate floor this summer.