Coinbase Torpedoes Senate ‘Clarity Act’ Hours Before Vote; Armstrong Slams ‘Defacto Bans’

The Deal is Off

Coinbase CEO Brian Armstrong has unilaterally withdrawn support for the Senate Banking Committee’s Digital Asset Market Clarity Act (CLARITY Act), effectively freezing the industry’s flagship legislation less than 24 hours before its scheduled markup. In a late-night public statement, Armstrong labeled the revised draft “materially worse than the current status quo,” citing last-minute provisions that he claims would hand the government unlimited surveillance powers over DeFi protocols.

The sudden reversal jeopardizes months of bipartisan negotiations led by Senator Tim Scott (R-SC) and signals a total breakdown between crypto-native firms and the banking lobby. Markets, however, appear relieved that a restrictive bill might die on the vine: Coinbase (COIN) traded firmly at $254.63 (+4%) while Bitcoin held the $97,600 level (+3.6%), suggesting investors prefer regulatory limbo over the proposed statutes.

The ‘Poison Pills’

The dispute centers on three specific clauses inserted into the draft at the behest of banking trade groups, who view stablecoins as an existential threat to low-cost deposits:

• Yield Bans: The draft closes a loophole in July 2025’s GENIUS Act that allowed third-party exchanges to pass yields (approx. 3.5%) to customers. The new language restricts yield-bearing products solely to insured depository institutions.
• DeFi Surveillance: Provisions would mandate that DeFi interfaces collect full KYC data on all users, a technical impossibility for most autonomous protocols.
• Tokenized Equity Ban: A blanket prohibition on trading tokenized shares of real-world assets.

“We’d rather have no bill than a bad bill. Hopefully we can all get to a better draft.”, Brian Armstrong

Institutional Friction

This is a power struggle, not a policy debate. Coinbase, a major donor to the incoming Trump administration, is leveraging its political capital to kill a bill that threatens its high-margin stablecoin revenue. The banking lobby’s attempt to ringfence yield products has backfired, forcing the crypto industry to align against its own legislative vehicle. With the Senate Banking Committee markup set for Thursday morning, the bill now lacks the industry consensus required for passage, leaving the 2026 regulatory calendar in disarray.