Coinbase standoff with CLARITY Act reshapes US crypto law

• Coinbase withdrew support for the CLARITY Act hours before Senate markup, citing bank lobby pressure and stablecoin yield terms.
  Tim Scott paused the session as Coinbase diverged from peers that still back the bill.
• Most firms like Kraken and Ripple favor moving forward and fixing language during markup.
  The pre-midterm schedule leaves less than a month to revise, route, and secure floor time.

Coinbase just turned what was supposed to be a landmark month for US crypto regulation into a new round of uncertainty in Washington, walking away from the CLARITY Act only hours before the Senate Banking Committee was set to begin markup on the bill. January had been framed as the moment when years of disputes over how digital assets should be treated in the United States would finally yield a durable framework, yet the largest US exchange stepped back at the last possible moment and forced lawmakers, lobbyists, and industry rivals to reassess both the bill and the political window that makes it viable.

Coinbase breaks with CLARITY Act on the eve of Senate markup

The CLARITY Act aimed to answer the core questions that have dogged US crypto markets for more than a decade, such as when a token counts as a security versus a commodity, which agencies oversee which activities, and what protections retail users can expect when they deposit their savings with a platform. The House had already passed its version of a crypto market structure bill months earlier after years of negotiation, and the White House signaled it would sign a final compromise, creating a rare alignment between both chambers and the executive branch on a contentious issue. Democrats and Republicans on the Senate Banking Committee had agreed on the major building blocks, preparing for a markup session that would adjust language line by line but keep the agreed structure in place. That expectation collapsed on Wednesday night, just before midnight, when Coinbase announced that it would not support the Senate draft after reviewing the latest version of the text. CEO Brian Armstrong posted that the company would rather have no bill than a bad bill and later argued that lobbyists from large banks influenced the final language to protect traditional savings accounts from competition by crypto wallets and yield products. His statement did more than signal disagreement over details; it told lawmakers that the most prominent US exchange would oppose the bill that they had spent years crafting, even as most of the rest of the industry moved in the opposite direction. Banking Committee chair Tim Scott responded by cancelling Thursday’s markup, calling it a brief pause while staff and members tried to salvage a path forward. That pause put the bill into a race against the political calendar, since the Senate is not in session the following week and formal campaign season for midterms begins in March, leaving less than one month of practical time to draft compromises, hold committee sessions, route the bill through the Senate Agriculture Committee, and still secure floor time for a final vote. In a year when most remaining floor time may be used to avoid another government shutdown, that schedule looks strained even without a major industry player like Coinbase pulling support at the last second.

Stablecoin yield, and tension with banks and rivals

The key policy fight that pushed Coinbase away from the CLARITY Act revolves around stablecoin yield, a topic that hits the company’s own business model directly. Stablecoins track the value of the US dollar and often sit at the center of crypto trading and payments; the question for lawmakers is whether users should legally earn interest or rewards on these tokens in a way that competes with interest on traditional bank deposits. Coinbase offers yield-bearing stablecoin products and would likely feel the sharpest impact from rules that restrict or heavily supervise these returns, especially if they privilege chartered banks or force platforms into a strict securities framework. Armstrong blamed bank lobbyists for the last-minute changes, saying they saw a threat in customers holding funds in crypto wallets instead of savings accounts and pushed language that would contain that shift. That claim matches a broader pattern in Washington, where established financial institutions join late in the legislative process and attempt to shape final drafts once they recognize concrete risks to their existing products. In this case, the finance industry had not played a major early role in the House’s crypto market structure bill, but it pressed harder as the Senate crafted its own version, adding another layer of negotiation on top of the growing influence of progressive Democrats on the committee. Most large crypto firms did not follow Coinbase. Kraken CEO Arjun Sethi publicly backed the Senate bill, stressing that reasonable people can disagree on specific provisions but should resolve disputes at the final stage rather than restart years of work from scratch. He argued that the right response to remaining issues is to refine the text, not abandon bipartisan progress. That view drew support from a16z managing partner Chris Dixon, Ripple CEO Brad Garlinghouse, and David Sacks, the White House special advisor on AI and crypto, who urged Coinbase to work through differences before the end of the month and avoid derailing the first serious chance at federal clarity. This emerging split leaves Coinbase isolated on the core question of whether a flawed but functioning framework is better than another stretch of regulatory gray area. Other firms appear ready to accept imperfect rules in exchange for legal certainty, while Coinbase, as a publicly traded exchange with a large stablecoin yield business, calculates that the cost of the current draft exceeds the benefit of that stability. The company’s decision highlights a tension between firm-specific interests and wider industry goals, because many smaller players lack the balance sheet and legal capacity to keep operating under shifting guidance from agencies and changing enforcement priorities.

Political clock, midterms, and the pressure on Coinbase and Congress

The time pressure surrounding the CLARITY Act explains why many policy experts see the current moment as unusually favorable and also unusually fragile. Once midterm campaigns begin in earnest, bipartisan cooperation tends to vanish, especially on issues that voters can tie to the presidential race. Support for CLARITY could be framed as support for the current administration or even as an indirect stance on Donald Trump, particularly because Senate Republicans are working to remove a Democrat-backed clause that would block Trump from profiting from crypto assets. As campaigns heat up, lawmakers will have little appetite to defend complex crypto provisions in town halls or debates when they already face angry constituents on other fronts. The narrow window becomes clear when you map out the steps. The Banking Committee needs to rewrite sections that Coinbase and others flagged, then hold another markup session to finalize its language. After that, jurisdiction over commodities pushes the draft to the Senate Agriculture Committee, which will want its own say on key definitions and oversight roles. Only after both committees agree can leaders request floor time, bring all 100 senators in for a full vote in person, and send a reconciled version back to the House or to a conference committee. In the meantime, the Senate must handle essential funding bills to avoid another government shutdown, which often swallow up any remaining time. Punting this process into next year brings its own risks. Many observers expect Republicans to lose control of either the House or the Senate in the next cycle, which would give Democrats a much easier path to blocking CLARITY for reasons ranging from consumer protection demands to simple partisan positioning. The current president is broadly seen as a friendly figure to the crypto sector, but the industry has no guarantee that the next administration will share that view or that regulatory agencies will keep the same approach if leadership changes. Ledger’s global head of policy, Seth Hertlein, put it bluntly when he asked whether the industry will ever see a setup as favorable as the present one and warned that if this window closes, any future compromise could involve much tougher terms. These factors explain why many in Washington felt frustrated when Coinbase reopened debates that lawmakers believed they had settled last year. The House had already spent years drafting its own crypto market structure bill, which passed in August with an overwhelmingly bipartisan vote and stood ready as a template. Instead of building directly on that text, the Senate chose to develop its own version, which then had to absorb pressure from bank lobbyists and progressive Democrats, stretching out the timeline. In that context, a late-stage defection by the largest US exchange adds another obstacle at exactly the point when lawmakers need fewer conflicts and more convergence.

Regulatory gray zones, and the future market structure fight

For more than a decade, crypto businesses in the United States operated under a shifting mix of enforcement actions, informal guidance, and overlapping claims by agencies, making it difficult to know when a token sale or lending product might trigger securities law or banking rules. Coinbase grew into the most visible US exchange in that environment, often presenting itself as a champion of clear rules and urging Congress to move beyond regulation by lawsuit. The CLARITY Act sought to answer that call by fixing core definitions and assigning responsibilities, so its near-collapse raises questions about how quickly the United States can reach stable ground. Policy advocates like Connor Brown from the Bitcoin Policy Institute warned that without firm rules, every change in administration could alter what software developers can build or publish, and which products platforms like Coinbase can legally offer. That concern goes beyond trading venues and stablecoin issuers; it affects wallet providers, miners, DeFi projects, and regular users who want to know whether their activities fall under securities law or commodities regulation. A statute that splits digital assets between the Securities and Exchange Commission and the Commodity Futures Trading Commission, while giving clear standards for custody and disclosures, would at least offer predictable bounds, even if not every firm liked every requirement. If the CLARITY Act fails this session, companies will likely continue facing case-by-case disputes and region-by-region differences, with some states encouraging crypto activity and others tightening restrictions. Coinbase has the scale and legal budget to manage that environment, but smaller exchanges and startups may struggle to survive uneven enforcement. That asymmetry could further concentrate the market in the hands of one or two large actors, even as those actors, including Coinbase, bear responsibility for choices that stalled a broad framework. The Senate’s reputation as the place where House bills go to die, as Hertlein joked, may hold true again, but this time the joke comes with direct consequences for every US-based crypto business and user.

Conclusion

Coinbase entered January positioned as a key voice in the push for clear US crypto rules, yet its late decision to withdraw support from the CLARITY Act has turned a rare bipartisan opening into a scramble against time and political headwinds. Lawmakers now must decide whether they can rewrite stablecoin yield provisions fast enough to bring the exchange back on board, while other major firms argue that the industry should accept a less than ideal bill rather than drift through more years of uncertainty. With midterm campaigns about to consume Congress and control of the chambers likely to shift, the current alignment of House, Senate leaders, and a supportive White House may prove hard to recreate, leaving the crypto sector to wonder whether this was the best chance for lasting market structure and whether Coinbase misjudged the cost of holding out for better terms.

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