Coinbase Torpedoes CLARITY Act; Senate Scraps Vote After Industry Revolt
Senate Banking Chair Tim Scott cancels the CLARITY Act vote after Coinbase withdraws support over ‘catastrophic’ bank-favored amendments.
The Deal Is Dead
The crypto industry’s flagship legislative victory has collapsed. Senate Banking Committee Chairman Tim Scott canceled the markup of the Digital Asset Market Clarity Act (CLARITY Act) late Wednesday, indefinitely stalling the bill just hours after Coinbase CEO Brian Armstrong withdrew his company’s support.
The reversal halts what was poised to be the most significant federal crypto framework to date. Markets reacted immediately: Bitcoin’s rally stalled, and shares of Coinbase (COIN) slid as the prospect of regulatory certainty vanished.
We’d rather have no bill than a bad bill.
Armstrong’s ultimatum reflects a frantic 48-hour shift in sentiment, driven by late-stage amendments that industry leaders claim would hand a monopoly to traditional banks.
The Poison Pill: 3.5% Yield
At the center of the collapse is a dispute over stablecoin rewards. The draft legislation reportedly includes provisions championed by the American Bankers Association (ABA) to prohibit crypto exchanges from offering “banking-like” yield products. This language specifically targets programs like Coinbase’s 3.5% USDC rewards, which banks argue allow crypto firms to bypass the Genius Act’s prohibition on interest-bearing payment stablecoins.
The banking lobby’s influence was heavy. ABA advocates reportedly flooded Senate offices with over 10,000 letters, arguing that allowing crypto platforms to offer yield without banking charters poses a systemic risk to local lending.
“Catastrophic” Provisions
The bill’s issues extend beyond yield. Armstrong described the legislation in its current form as “catastrophic” for American consumers, citing three deal-breakers:
- DeFi Ban: Broad language that could effectively outlaw decentralized finance protocols by imposing impossible compliance standards.
- Surveillance: Expanded government authority to access user financial data without a warrant.
- Tokenized Equities: A de facto ban on trading tokenized real-world assets.
For Chairman Scott, the cancellation is a significant setback. He had positioned the CLARITY Act as a bipartisan compromise to make the U.S. the “crypto capital of the world.” Instead, the breakdown exposes the widening chasm between fintech innovators and incumbent financial institutions.
No new date for the markup has been set.
