Coinbase’s sudden withdrawal of support for the Senate version of the CLARITY Act has thrown U.S. crypto market reform into uncertainty, forcing the cancellation of a planned Senate Banking Committee markup and threatening months of bipartisan negotiations aimed at creating the nation’s first unified regulatory framework for digital assets.
The Sudden Reversal
The cryptocurrency industry was jolted this week when Coinbase CEO Brian Armstrong announced the exchange could no longer support the Senate Banking Committee’s rewritten version of the Digital Asset Market Clarity Act of 2025. The decision came just hours before the committee planned to advance the legislation, amplifying its political impact and signaling potential fractures in industry consensus.
“Coinbase remains the largest regulated crypto exchange in the United States and one of the most active industry participants in policy discussions,” according to reporting on the legislative battle. Its withdrawal immediately raised concerns that the effort to create coherent national crypto market rules could stall once again.
What Changed in the Senate Version
The House passed the CLARITY Act with provisions assigning the CFTC primary authority over digital commodities like Bitcoin, while preserving SEC oversight of security token sales. However, the Senate Banking Committee substantially rewrote major sections of the bill through a full substitute amendment, reshaping the regulatory framework before formal markup.
Coinbase identified four central concerns with the Senate rewrite:
Tokenized Equities Restrictions: The revised draft effectively restricts how blockchain-based shares and financial instruments can operate on crypto infrastructure. Coinbase argues this could slow innovation in digital securities markets viewed as a bridge between traditional finance and decentralized systems.
DeFi Data Access: The proposal expands government access to decentralized finance transaction data, placing some decentralized protocols under Bank Secrecy Act and anti-money-laundering obligations. Critics worry this compromises the open architecture of DeFi platforms and burdens projects not built to handle such compliance.
Expanded SEC Authority: The new version broadens Securities and Exchange Commission control over crypto markets, which Coinbase warns could revive regulatory uncertainty from previous enforcement-focused approaches.
Stablecoin and Banking Provisions: Draft amendments would kill rewards on stablecoins, a provision Coinbase contends allows large banks to restrict competition and reduce incentives for crypto-native payment products.
Industry Divisions Surface
Coinbase’s decision did not produce unified opposition. Instead, it exposed deep divides over industry priorities and business models. While Coinbase took a strong public stance, other major firms including Ripple have signaled willingness to continue supporting negotiations.
The stablecoin rewards issue proved particularly divisive, with traditional financial institutions and some policymakers supporting restrictions, while crypto-native companies argue consumer protections should allow yield-bearing stablecoins. According to industry advocates, 250,000 messages from consumers were sent to Congress expressing concerns about stablecoin reward restrictions.
White House Signals Continued Momentum
Despite the disruption, administration officials responsible for digital asset policy described market structure legislation as closer to passage than ever before. The White House encouraged industry participants to use the current pause to narrow differences and preserve momentum.
Senator Tim Scott, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, stated that he had “spoken with leaders across the crypto industry, the financial sector, and my Democratic and Republican colleagues, and everyone remains at the table working in good faith.”
Coinbase CEO Armstrong denied reports of a rift with the White House over the company’s withdrawal, though unnamed sources suggested administration officials were frustrated by the last-minute nature of the announcement.
The Stakes and Timeline
Passage of the CLARITY Act would establish clear boundaries between regulatory agencies and create consistent definitions for digital assets—addressing gaps that have forced companies to navigate regulatory uncertainty on a case-by-case basis. Without federal standards, firms risk enforcement actions or investigations over new products.
However, political pressures are mounting. A potential government shutdown later in January and mid-term elections later in 2026 could significantly constrain Republicans’ ability to advance legislation. Committee leaders must coordinate across chambers and parties to bring a revised bill to markup while maintaining bipartisan backing.
The current legislative pause represents a critical juncture. Whether Coinbase re-enters the coalition supporting the bill or continues lobbying for structural changes will signal the strength of industry consensus—and could determine whether the United States finalizes a national framework for crypto markets or remains behind other major regions already operating under unified regulatory rules.
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