Crypto Industry Divided as CLARITY Act Faces Major Setback

TLDR

• Coinbase withdrew support for the CLARITY Act over concerns about restrictions on DeFi, tokenized stocks, and stablecoin yield
• CEO Brian Armstrong denied reports of tension with the White House, stating negotiations remain constructive and ongoing
• The Senate Banking Committee postponed the bill’s markup to allow more time for industry negotiations
• Analyst Michaël van de Poppe said the stalling benefits crypto by preventing overregulation of decentralized finance
• The bill’s debate has exposed divisions within the crypto industry over regulatory clarity versus consumer protection

Coinbase has pulled its backing for the CLARITY Act, a major crypto market structure bill in Congress. The exchange cited concerns about provisions that could harm decentralized finance and limit consumer access to stablecoin products.

CEO Brian Armstrong announced the decision earlier this week. He outlined several issues with the current draft of the legislation.

The concerns include what Armstrong described as a “de facto ban” on tokenized stocks. The bill would also give government agencies access to user records on DeFi platforms.

Another provision would prohibit companies from sharing stablecoin yield with customers. Armstrong called these elements “catastrophic” for innovation and consumers.

Market analyst Michaël van de Poppe said the delay could benefit the crypto industry. He warned that passing the bill in its current form would negatively impact markets and decentralized finance.

Van de Poppe compared the situation to the Markets in Crypto Assets regulation in Europe. That framework went through multiple rounds of negotiations before final approval.

The Senate Banking Committee postponed a planned markup of the CLARITY Act. The delay gives lawmakers and industry participants more time to negotiate changes.

Armstrong denied reports of tension between Coinbase and the White House. Independent crypto reporter Eleanor Terrett had reported that administration officials threatened to withdraw support for the bill.

Industry Splits Over Stablecoin Yield Ban

Armstrong said the White House has remained “super constructive” during discussions. He stated that administration officials encouraged Coinbase to explore compromises with community banks.

Those negotiations are ongoing. Armstrong expects a revised version of the bill to return for consideration within weeks.

The debate has revealed divisions within the crypto sector. Some executives believe the CLARITY Act would provide needed regulatory clarity.

Others view it as a concession to traditional banking interests. The strongest disagreements center on the stablecoin yield provision.

Galaxy Digital raised concerns about surveillance powers in a Senate Banking draft. The firm warned the language could grant Treasury “Patriot Act-style” authority over crypto transactions.

White House Denies Rift Claims

Critics say aggressive surveillance requirements could push crypto activity offshore. They argue such measures would harm innovation in the United States.

Armstrong has circulated a list of objections to the current bill version. The list focuses on impacts to DeFi platforms and stablecoin products.

Coinbase stated it would prefer to see the bill delayed rather than passed as written. The exchange wants substantial changes before offering support again.

The CLARITY Act represents a major policy goal for the crypto industry. Supporters want clear regulatory guidelines for digital asset markets.

Congressional allies of the crypto sector have pushed for the legislation. They argue clear rules would benefit both businesses and consumers.

Armstrong said Coinbase remains engaged in discussions about the bill. The company continues working with lawmakers and the White House on potential revisions.

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