Coinbase Torpedoes Senate ‘Clarity Act’; Armstrong Risks Industry Split
Coinbase CEO Brian Armstrong kills the Senate’s market structure bill over stablecoin yield bans, splitting the industry as Ripple and Kraken urge compromise.
The Deal Breaker
Brian Armstrong just pulled the emergency brake. In a move that blindsided Senate negotiators less than 24 hours before a critical markup, the Coinbase CEO publicly withdrew support for the Senate Banking Committee’s “Clarity Act,” effectively killing its chances of passing this week. The market reacted instantly: COIN slid 2% to $250.30 in after-hours trading, while Bitcoin held stubborn at $96,000, signaling traders see this as a corporate power play rather than a systemic failure.
Armstrong’s ultimatum was blunt. “We’d rather have no bill than a bad bill,” he wrote, claiming the current draft contains a “de facto ban” on tokenized equities, a sector Coinbase is aggressively targeting for 2026. But the real friction point lies elsewhere: stablecoin rewards.
Follow the Money
The bill’s text, heavily influenced by bank lobbyists, prohibits crypto platforms from paying yield on idle stablecoin balances. For Coinbase, this isn’t just policy; it’s P&L. Stablecoin revenue generated an estimated $1.3 billion for the exchange last year. If the Clarity Act passes as written, that revenue stream evaporates.
“The current Senate compromise is worse than no bill at all. Sounds like the banks have been meddling.”
— Tim Draper, Venture Capitalist
The Industry Fractures
Armstrong’s gambit exposed deep fault lines. While Coinbase walked away, others stayed at the table, desperate for regulatory legitimacy. Ripple CEO Brad Garlinghouse publicly broke ranks, calling the bill a “massive step forward” and urging lawmakers to continue. Kraken co-CEO Arjun Sethi similarly signaled commitment to the process.
The rift is fundamental. Tokenization firms, who view the bill’s framework as their only path to Wall Street integration, privately dispute Armstrong’s claims about an equity ban. Meanwhile, the DeFi sector is celebrating the obstruction. To them, the bill’s requirements for centralized compliance were an existential threat; its collapse is a reprieve.
Institutional Context: The Warren Factor
The Senate isn’t done. Democrats are scrambling to salvage the legislation with a scheduled industry call this Friday. But the window is closing. Senator Elizabeth Warren has already attached 38 amendments to the draft, including strict AML requirements for DeFi front-ends, that make the bill radioactive to crypto natives. Armstrong’s withdrawal gives Republicans cover to walk away, but it also leaves the industry in a dangerous limbo: stuck between Warren’s “Anti-Crypto Army” and a banking lobby intent on crushing stablecoin competition.
