Unraveling the Power, Interests, and Betrayals Behind the Clarity Act: How Can Retail Investors Hedge Risks and Make Money?

Written by: Changan, Teddy, Amelia, Denise I Biteye Content Team

In early 2026, after five years of regulatory wrangling and hundreds of enforcement cases, the global cryptocurrency market's attention was focused on Capitol Hill in Washington. This bill, named CLARITY, was originally intended to provide clarity for digital assets that had long been in a regulatory gray area, but at the last minute it turned into an ultimate battle between the old and new financial orders.

Today, we delve into this hundreds-of-pages bill, not to delve into the legal statutes, but to explore: Why did Coinbase, which had previously spearheaded the embrace of regulation, "turn against" at the last minute? And how will this stack of hundreds of pages change your wallet, as a retail investor?

Background: The End of the Law of the Jungle

Before the Clarity Act, cryptocurrency regulation in the United States was like a lawless zone, with major tech giants struggling in chaos.

• A Dual-Holder Civil War: Before CLARITY, the US lacked a unified framework for crypto assets. The SEC (Securities and Exchange Commission) wanted to regulate tokens like stocks, while the CFTC (Commodity Futures Trading Commission) wanted to regulate them like commodities. Projects caught in the middle never knew which one would knock on their door tomorrow.
• The Fear of "Using Litigation as a Substitute for Regulation": Due to the lack of clear laws, the SEC chose a simple and crude path: "file a lawsuit first, then set regulations." Ripple and Coinbase have both suffered greatly from this. Taking the Ripple case as an example, this lawsuit lasted for more than three years, directly affecting the market value fluctuations of XRP, which amounted to hundreds of billions of dollars, and becoming a psychological shadow over the entire industry. This directly led to a large outflow of talent and capital to Singapore, Europe, and other places.
• Traditional banks are anxious: Stablecoins offer an average annualized return of 4.2%, far exceeding traditional bank deposit rates, raising concerns about a potential monthly outflow of over $20 billion in deposits. To protect their "wallets," bank lobbying groups urgently need legislation to put a stop to cryptocurrencies.

To end the chaos, the hundreds-of-pages-long Clarity Bill attempts to redefine market rules:

1) Clearly define the governing body: Assets that are sufficiently decentralized and no longer rely on a single issuer (such as Bitcoin) are regulated by the CFTC. Assets in their early stages and with obvious financing attributes are regulated by the SEC.

2) Integrating the stablecoin framework: Excluding “permitted payment stablecoins” that comply with the GENIUS Act from the definition of securities, with their trading and use overseen by the CFTC/SEC, and issuance and reserve requirements referencing the GENIUS Act.

Ending regulatory infighting and giving the market a "predictable future" is why companies like Coinbase, Ripple, and Kraken publicly supported CLARITY from the beginning.

Until the Senate version appeared.

Bald Guy's "Late-Night Betrayal"

The initial version of the Clarity Act had a clear intent: to redefine the rules through three pillars—asset classification, funding regulation, and stablecoin access. However, in the Senate amendment in January 2026, the direction shifted dramatically, and the provisions became extremely stringent.

1. Tokenization ban: The Senate draft bill includes provisions that effectively restrict the direct tokenization and trading of traditional financial assets (such as US stocks and bonds) on public blockchains.

2. RWA Excluded: The bill explicitly excludes RWAs from digital goods, meaning they will be subject to extremely strict and inflexible securities laws and may even be unable to list on CEXs.

This amendment sparked heated debate within the industry, with Coinbase CEO Brian publicly withdrawing his support for the bill, stating bluntly that the amended bill was worse than no bill at all. The main points of opposition are threefold:

1. Eliminating stablecoin rewards (the most direct conflict of interest)

Coinbase partnered with Circle, offering users approximately 3.5% rewards for holding USDC. This has generated significant revenue for Coinbase. Bank lobbying groups strongly advocated for this, fearing depositors would shift their funds from banks to interest-bearing stablecoins.

2. The ban on tokenization of US stocks and RWA

Coinbase has always been bullish on tokenization, believing it to be the future of finance. The new legislation, through its complex registration requirements, effectively prohibits the free trading of tokenized shares on crypto infrastructure.

3. The End of DeFi

The bill requires almost all DeFi protocols to register like banks or brokers, granting governments significant access to DeFi transaction data. Brian Armstrong argues that this violates user privacy and is technically impractical.

How will the bill affect us?

The same bill can have drastically different effects on different market participants.

1. Retail investors: a double-edged sword

Positive aspect: The bill mandates that CEXs must segregate customer funds and have them held in escrow by a third party, thus preventing a tragedy like FTX from happening at its source.

Negative factors: Due to the 2026 amendment's protection of banks, retail investors may lose 3% to 5% of their holding interest on CEX stablecoins. Furthermore, due to restrictions on RWA, the vision of ordinary people purchasing fractional shares (such as 0.01 shares of Tesla) on-chain will also be shattered. Of course, this depends on whether the asset and the CEX's region fall under the jurisdiction of the legislation.

2. Institutions: Compliance Dividends

For institutions, this is more like a long-awaited compliance ticket. Legal certainty is a prerequisite for giants like Goldman Sachs and BlackRock to enter the market.

Once the jurisdictional boundaries between the SEC and CFTC are clarified, billions of dollars of institutional funds will be compliantly allocated to digital commodities other than Bitcoin and Ethereum, which will inevitably trigger a wave of applications for altcoin spot ETFs.

3. Project Owners: Some Rejoice, Some Sorrow

Projects defined as digital goods are thus freed from the SEC's scrutiny; those defined as securities face extremely heavy compliance reporting obligations and financing restrictions.

In addition, the bill mandates a lock-up period for the core team's tokens, effectively curbing the bad habit of dumping tokens at the opening.

Fortunately, the bill explicitly protects non-managed developers. If you simply write code and release open-source licenses without handling customer funds, you will not be considered a money transmitter, which protects pure technical innovation at the license level.

Industry-wide debate: Consensus or division?

Biteye has compiled the positions of industry KOLs and project teams on the latest revised bill.

AB Kuai.Dong @_FORAB (XHunt ranking: 1087)

Tweet link: https://x.com/_FORAB/status/2011710073933095037

Opinion: Reports on Coinbase's sudden change of heart suggest that the latest version of the bill is favorable to traditional banks but detrimental to crypto-native companies. Specific points of opposition include restrictions on stablecoin rewards, increased costs of stock tokenization, and expanded government regulation of DeFi, potentially stifling innovation.

qinbafrank @qinbafrank (XHunt ranking: 1533)

Tweet link: https://x.com/qinbafrank/status/2011631328555647098

Opinion: The Senate Banking Committee's decision to cancel its review due to Coinbase's opposition could lead to a correction in the cryptocurrency market. The opposition focuses on issues including a "de facto ban" on tokenized equity, DeFi privacy violations, weakening the CFTC's power, and eliminating stablecoin rewards, which they argue would allow the SEC to dominate and stifle innovation.

Phyrex @Phyrex_Ni (XHunt ranking: 765)

Tweet link: https://x.com/Phyrex_Ni/status/2011810871211925967

Opinion: This analysis examines the reasons why Coinbsase CEO blocked the bill, including restrictions on tokenized stocks, functional regulation of DeFi, the boundaries of SEC power, the prohibition of interest-bearing stablecoins, and ethical conflicts of interest involving the Trump family.

PANews@PANews (XHunt ranking: 1827)

Tweet link: https://x.com/PANews/status/2011013801802686752

Opinion: The view is that delays will become increasingly detrimental. January is one of the few available windows for structural legislation in the Senate; if substantial progress is not made, it could easily be "naturally squeezed out" of the overall legislative schedule. Furthermore, if the Democrats gain a majority in the midterm elections, the probability of passage will be even lower.

Jason Chen (@jason_chen998, XHunt ranking: 1082)

Tweet link: https://x.com/jason_chen998/status/2012358494901694931

Opinion: The conflict is essentially driven by the interests of each party. For example, Coinbase publicly opposes the ban on issuing interest on stablecoins because the current version would directly cause Coinbase to lose $1 billion in revenue and a large number of users annually. On the other hand, Ripple's CEO strongly supports the Clarity Act, also because the ban on issuing interest on stablecoins would have little impact on Ripple.

Bitcoin Orange @chengzi_95330 (XHunt Ranking: 3508)

Tweet link: https://x.com/chengzi_95330/status/2012136666912494037

Opinion: It is pointed out that although the current plan is not perfect, a16z, Circle, Kraken and others are willing to continue to push forward because they are afraid that if they overturn the table now, the legislative window may be closed directly; while Coinbase believes that if core issues such as stablecoin yields cannot be written into the legislation in such a crypto-friendly political environment, then there will be no chance for this in a future more anti-crypto political cycle. Therefore, they are making a "bet on historical judgment".

Brad Garlinghouse (Ripple CEO) @bgarlinghouse (XHunt ranking: 1870)

Tweet link: https://x.com/bgarlinghouse/status/2011559973818343785

Opinion: Surprised by Coinbase's strong opposition, Garlinghouse believes Brian's concerns are valid, but emphasizes that "the rest of the industry remains constructively supportive and working to resolve the issues." Garlinghouse states that Ripple is prepared to move forward within a compliant framework (such as XRPL tokenization), views the legislation as a step forward, and is unwilling to abandon the overall process due to disagreements.

Vlad Tenev (Robinhood CEO) @vladtenev (XHunt ranking: 380)

Tweet link: https://x.com/vladtenev/status/2011622052457783432

Opinion: Support for progress. He reiterated Robinhood's support for Congress passing the Market Structure Act, acknowledging that work remains to be done (such as addressing staking restrictions in some states and the availability of stock tokenization), but seeing a clear path and being willing to assist the Senate Banking Committee in completing it. He emphasized that the US needs to lead crypto policy to unlock innovation and protect consumers.

Arjun Sethi (Kraken co-CEO) @arjunsethi (XHunt ranking: 1941)

Tweet link: https://x.com/arjunsethi/status/2011579807272759639

He expressed strong support, stating that Kraken is fully committed to supporting the efforts of Tim Scott and Cynthia Lummis, criticizing the ease with which they could "walk away or declare defeat," but emphasizing that what truly matters is "remaining present, addressing problems, and building consensus." He warned that giving up would exacerbate uncertainty and drive innovation overseas.

Retail Investors' Hedging and Profit-Making Guide: 2026

A rite of passage, a new beginning. Looking back at the entire process of the CLARITY bill's evolution, it was essentially a "rite of passage" for the crypto industry. It marked the official leap of cryptocurrency from the periphery into the main stage of global finance.

The clarity of regulation itself is the most important infrastructure. For retail investors, understanding and adapting to these new rules is key to protecting and growing their assets in the coming years. Here are three realistic and actionable action plans for you.

1. Reassess the portfolio and shift towards "digital goods" assets.

For crypto asset holdings, it's advisable to increase the allocation weight of assets explicitly classified as "digital commodities" (such as Bitcoin and Ethereum) and established blue-chip tokens within their ecosystems. These assets will initially see large-scale compliant inflows from traditional institutions due to the reduction in regulatory uncertainty, and their spot ETFs and other products will be more easily approved, thus providing strong price support. Conversely, extreme caution is needed with newly issued tokens that clearly may be classified as "securities," as they will face stringent disclosure and financing restrictions, and liquidity may dry up.

2. Reconfigure the stablecoin strategy and explore alternative yield-generating solutions.

If users are located in regions governed by Clarity (such as the United States), the legislation may restrict centralized exchanges (CEXs) from offering 3% to 5% stablecoin rewards. If the legislation is implemented and causes compliant exchanges to offer zero interest, users should consider transferring funds to non-custodial on-chain DeFi protocols. Although the legislation strengthens regulation of DeFi, as long as the protocol itself is censorship-resistant, its native yields may serve as a safe haven.

3. Exercise caution in the RWA sector and be wary of liquidity traps.

Given the Senate's extremely stringent stance on RWAs (Real-World Assets), which may even prohibit their listing on centralized exchanges (CEXs), if you currently hold a significant amount of tokenized US stocks or bonds, be wary of the risk of liquidity depletion. Furthermore, before the bill is finalized, avoid blindly participating in tokenized traditional financial products that require high compliance and Know Your Customer (KYC) verification, as these products are most vulnerable to being forced to shut down due to policy changes.