Coinbase Pushes Back on Stablecoin Bill While Congress Embraces Tokenization

Regulations

The stablecoin bill that Washington thought was close to the finish line has hit another wall, and once again, Coinbase is the one standing in the way.

Key Takeaways

Coinbase is blocking the CLARITY Act over a provision banning passive stablecoin yield
USDC interest income is a core high-margin revenue stream for Coinbase
Circle shares dropped 20% Tuesday, though analysts say the selloff was overdone
Congress held a separate tokenization hearing Wednesday with broad industry support

According to a report from Punchbowl News, Coinbase has told Senate offices it cannot get behind the latest version of the CLARITY Act – specifically its treatment of stablecoin rewards. The provision in question would impose a broad ban on passive yield, allowing only activity-based rewards tied to things like trading or payment activity. Anything that resembles interest on a deposit account is out.

It’s a compromise that was designed to placate the banking lobby, which has spent months warning that yield-bearing stablecoins would drain savings deposits out of the traditional financial system. Banks have long argued that if consumers can park money in digital dollars and earn better returns, they will – and conventional deposit accounts would take the hit.

The White House had reportedly brokered an agreement in principle with key Senate leaders just last week, briefly raising hopes that the months-long standoff between crypto and banking interests was finally breaking. That optimism didn’t last long.

Follow the Revenue

Coinbase’s opposition isn’t ideological. It can be argued that it is financial.

The exchange has a distribution agreement with Circle, the company behind USDC – currently the second-largest stablecoin in the market with a $78.6 billion market cap, trailing only Tether.

Under that arrangement, Coinbase captures nearly all of the interest income generated by USDC held on its platform. Strip out stablecoin yield, and you strip out a significant chunk of one of Coinbase’s highest-margin revenue streams. Crypto leaders had already flagged the bill’s yield language as “restrictive” – now Coinbase is making that position official.

When the latest draft of the CLARITY Act circulated, Coinbase stock fell sharply. Circle didn’t escape either. Shares of the stablecoin issuer dropped roughly 20% on Tuesday after the provisions became public.

Analysts at Bernstein pushed back on that reaction Wednesday, arguing investors missed the point – Circle’s core business model isn’t meaningfully disrupted by the proposed legislation, and the selloff was likely overdone. The market, it seems, hit the panic button before reading the fine print.

Meanwhile, Tokenization Gets a Warmer Reception

While the stablecoin standoff dragged on, a separate crypto-related hearing on Capitol Hill took a noticeably different tone.

The House Financial Services Committee convened Wednesday for a session titled “Tokenization and the Future of Securities: Modernizing Our Capital Markets,” and the mood was considerably less combative. Executives from the crypto industry and traditional finance sat side by side and mostly agreed on the fundamentals: tokenized securities should play by the same rules as conventional ones.

Summer Mersinger, CEO of the Blockchain Association, argued that blockchain-based record-keeping is simply an upgrade on the flawed manual systems currently in use – cheaper, faster, and more transparent. John Zecca of Nasdaq noted that exchanges are technically capable of collecting KYC data directly at the protocol level through permissioned blockchains, addressing one of the standard compliance objections.

Even Ranking Member Maxine Waters, not typically known for enthusiasm toward crypto legislation, expressed support for tokenization’s potential to improve market efficiency – with the caveat that investor protection has to come first and that the technology cannot be used as a regulatory escape hatch.

Two bills under review at the hearing are attempting to give this space a formal framework: the Modernizing Markets Through Tokenization Act, which would direct the SEC and CFTC to jointly study whether new rules are needed, and the Capital Markets Technology Modernization Act of 2026, which aims to clarify that broker-dealers and financial advisors can use blockchain-based record-keeping without running afoul of existing SEC rules.

The contrast with the CLARITY Act negotiations was hard to miss. Tokenization, for now, has friends on both sides. Stablecoin yield does not.

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Author

Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.