The CLARITY Act, seen as a core piece of U.S. legislation on digital asset market structure, has reached a critical juncture as the Senate breaks for recess.

Bitcoin Magazine reported on Sunday that as the U.S. Senate enters a July 4 Independence Day recess, the bill’s handling has shifted from open meetings to behind-the-scenes negotiations.

Senators are set to return to Congress on July 13. Even after they return, the timeline is tight. Senate Republican Leader John Thune has said the week that includes July 13 must prioritise the National Defense Authorization Act, or NDAA. That could push a CLARITY Act floor move to late July or the first week of August. That is expected to be the last legislative slot before the summer recess.

The biggest variable is whether the bill can secure 60 votes, the threshold for Senate passage. Republicans hold 53 seats, meaning at least 7 Democrats would need to back it even if all Republicans vote in favour.

Even that is not certain. Republican Senators Josh Hawley and Rand Paul previously voted against the GENIUS Act, a stablecoin regulation bill, leaving open the possibility of defections within the party.

A central sticking point in talks is ethics rules related to President Donald Trump’s cryptocurrency holdings. Reuters reported that Trump’s crypto holdings have added more than $2 billion in new assets since he returned to power. Democrats say the bill should include meaningful ethics provisions to prevent potential conflicts of interest.

Senator Cynthia Lummis has recently proposed a compromise. Under it, a state attorney general could sue an exchange if a token issued by a public official is listed on the exchange while in violation of the law. It remains unclear whether the proposal can win Democratic support. The White House has also not stated an official position on the compromise.

Another key dispute is Section 604 of the bill. The provision includes the Blockchain Regulatory Certainty Act. Law enforcement agencies are concerned that if implemented as written, it could weaken authority to investigate and prosecute on-chain crimes. Some in the industry have left open the possibility of revising the provision, but there is still no agreement.

A draft from the Agriculture Committee also remains a separate subject for negotiation. People familiar with the talks said unresolved issues include which laws take precedence between federal and state rules, conflict-of-interest provisions for cryptocurrency exchanges, and limits on transactions with affiliates. As a result, staff-level work on the wording is expected to continue until senators return.

The House of Representatives is also continuing related discussions. The House Financial Services Committee plans to hold a field hearing on July 17 to examine how the CLARITY Act could affect innovation in the digital asset industry. Senate Banking Committee Chairman Tim Scott has also continued to push for passage, and an assessment has emerged that Republican leaders’ legislative drive remains intact.

Ultimately, the next 2 weeks are expected to hinge on how far the bill’s language can be revised to attract bipartisan support. With limited floor time after the Senate returns because of the NDAA schedule, the outcome of negotiations over conflict-of-interest rules and investigative authority language is expected to determine whether the CLARITY Act passes before August.