It took less than 48 hours for the industry’s flagship legislation to turn toxic.
Late Tuesday night, Coinbase CEO Brian Armstrong announced the exchange could no longer support the Senate Banking Committee’s draft of the Digital Asset Market Clarity Act (CLARITY Act). In a sharp rebuke posted to X, Armstrong labeled the revised text “materially worse than the current status quo,” stating bluntly: “We’d rather have no bill than a bad bill.”
The reversal comes just hours before a scheduled Thursday markup, effectively torpedoing the unified front crypto lobbyists had spent months building. The immediate market reaction was muted but bearish, with Bitcoin clinging to $90,500 and Solana (SOL) trading flat at $138 as traders digested the likely death of regulatory clarity for 2026.
The Dealbreaker: Stablecoin Yields
The core friction point is not the SEC-CFTC jurisdiction split, but a provision insiders view as a direct concession to the banking lobby. While the GENIUS Act (passed July 2025) already prohibited issuers from paying interest, the new draft reportedly closes the “third-party loophole.” This would ban exchanges like Coinbase from passing rewards to users, a revenue stream projected to contribute $1.3 billion to the company’s 2025 topline.
The American Bankers Association has argued these rewards siphon deposits from community lenders. For Armstrong, the ban is an existential threat to Coinbase’s business model and a barrier to U.S. competitiveness.
DeFi Surveillance
Beyond stablecoins, the draft bill expands Treasury surveillance powers to a degree critics are comparing to a “digital Patriot Act.” New provisions would reportedly classify decentralized finance (DeFi) interfaces and wallet providers as brokers, forcing impossible compliance standards on non-custodial software. Armstrong noted this would effectively ban tokenized equities and force DeFi development offshore.
“There are too many issues. This version would be materially worse than the current status quo.”, Brian Armstrong
With Senator Tim Scott (R-SC) set to gavel the committee into session tomorrow, the withdrawal of the largest U.S. exchange leaves the bill with little political cover. Without Coinbase’s blessing, the path to 60 votes in the Senate has likely vanished.
