What to know:
- The CLARITY Act expands Treasury powers to block illicit crypto linked to the Lazarus Group.
- Section 10305 lets qualified firms hold suspicious crypto transfers for up to 30 days.
- Polymarket traders put 2026 CLARITY Act passage odds at 38% before the Senate recess.
The CLARITY Act could give U.S. authorities and crypto companies new tools against North Korea’s Lazarus Group, according to Senator Cynthia Lummis. Her national security argument comes as the bill faces a narrow Senate timetable before the August recess.
Lummis wrote on X on July 27 that Lazarus and other illicit actors exploit gaps in financial rules. She said the proposal would expand Treasury powers. It would also protect companies that temporarily stop suspicious transactions before funds move.
Polymarket traders placed the chance of passage in 2026 at 38% on July 26. The figure had reached 82% in February. The Senate is scheduled to begin its recess on August 7.
How the CLARITY Act Targets Illicit Finance
These include the following in the Senate substitute for H.R. 3633 of July 22. Section 10201 subjects registered digital commodity brokers, dealers, and exchanges to Bank Secrecy Act provisions.
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These would be required to establish anti-money-laundering policies, transaction reports, and suspicious activities monitoring. Other sections pertain to digital asset kiosks and non-decentralized finance trading protocols.
The latter would not necessarily apply to all DeFi interfaces or crypto ATMs. Section 10303 authorizes Treasury to impose special measures.
This would allow limiting fund transmissions that involve digital asset money laundering related to foreign countries, institutions, and transaction categories. The section applies beyond Iran or North Korea.
Section 10305 pertains to temporary holds on digital asset transactions. A qualifying financial institution would be able to put off transferring the funds within 30 days. They would be required to have reasonable grounds to assume that a transaction is illegal.
If there is a qualified written request from an authorized agency, it will be possible to increase the holding period by 150 additional days. The institution must inform the authorities and attempt to notify the user if possible except in specified cases.
Companies following those steps in good faith would receive protection from federal or state private lawsuits. The provision does not require platforms to freeze assets when existing law imposes no such duty.
Lazarus Attacks Drive Security Debate
The threat cited by Lummis has caused major losses. The FBI attributed the 2022 Ronin Bridge attack to Lazarus Group and APT38. The hackers stole about $620 million in ether from infrastructure linked to Axie Infinity.
In February 2025, the FBI blamed North Korean TraderTraitor actors for stealing about $1.5 billion from Bybit. Treasury later reported that North Korea-linked cybercriminals stole more than $3 billion during the previous three years. Most of the assets were cryptocurrency.
U.S. agencies have also warned about North Korean operatives using false identities to secure remote IT work. Treasury said those jobs can generate revenue for weapons programs. The access can also support cyber intrusions or money laundering.
Warren Challenges the Security Case
Senator Elizabeth Warren has challenged the national security case. She called the CLARITY Act a ticket to sanctions evasion. Warren also said the July 22 draft failed to protect investors, the financial system, and national security.
Richard Nephew, a former National Security Council Iran director, raised a separate concern. He argued that the measure leaves some DeFi actors outside clear compliance duties. Supporters maintain that its expanded controls would make sanctions evasion harder.
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