Coinbase Pulls Backing for CLARITY Act Ahead of Senate Banking Markup

Highlights:

• Coinbase has withdrawn support for the CLARITY Act, citing privacy risks and concerns over regulatory authority.
• Senate lawmakers have delayed the vote as disputes continue over stablecoin rewards.
• Digital Chamber Ripple leaders and a16z Crypto have continued to support talks to improve the bill.

Coinbase has withdrawn its support for the Senate Banking Committee’s crypto market structure bill before a scheduled markup. The move followed the release of a late manager’s amendment in the bill. Lawmakers have spent months negotiating a bipartisan draft. However, the revised language has triggered fresh objections from industry leaders.

Coinbase Chief Executive Officer Brian Armstrong said the draft would leave the industry worse off than it is in its current condition. He said the CLARITY Act text contained too many unresolved problems. Armstrong urged lawmakers to slow the process and fix core issues. He said rushed legislation could harm innovation. “We’d rather have no bill than a bad bill. Hopefully, we can all get to a better draft,” Armstrong said.

The CEO has noted that the proposal creates a de facto ban on tokenized equities. He also said it imposes strict limits on decentralized finance activity. According to him, those limits will curb development in U.S. markets. In addition, he warned that some provisions expand government access to user financial records. Coinbase noted that these changes cross key industry lines.

The exchange also criticized changes to regulatory authority. Armstrong said the draft weakened the Commodity Futures Trading Commission. At the same time, it expanded the Securities and Exchange Commission’s influence. Many crypto firms are cautious about stronger SEC control.

Privacy DeFi Stablecoins and Regulator Power Drive Industry Concerns

Privacy concerns are one of the major concerns that Coinbase highlighted. Armstrong said that the provisions tied to the CLARITY Act could grant authorities broad access to financial data. He warned that such access would erode user privacy protections that are in place. Many developers view privacy as an essential tool for the growth of decentralized systems.

Armstrong also noted that the proposed amendments could eliminate stablecoin rewards offered by platforms. Banking groups have lobbied lawmakers to restrict crypto yield programs. They argue that rewards could pull deposits from traditional banks. However, crypto firms say open competition will support consumer choice.

Industry leaders noted that lawmakers already debated rewards during the GENIUS Act process. That law restricts issuers from paying direct interest. However, it allows third-party platforms to offer rewards. Crypto firms argue new limits would exceed that framework. They warn that tighter rules could push activity offshore.

Regulatory balance remains another unresolved concern. Many firms argue that the CFTC should retain a strong role. They fear the SEC would gain first authority over asset classification. Those fears stem from years of regulation by enforcement.

CLARITY Act Markup Delayed as Crypto Industry Splits

The Senate Banking Committee has delayed the markup vote shortly after Coinbase pulled its support. Chairman Tim Scott said negotiations will continue in good faith. He further stated that lawmakers are aiming to protect consumers and strengthen oversight. However, the committee has not set a new vote date.

Several crypto leaders have voiced support despite the setback. The Digital Chamber said it remains committed to passing the market structure legislation. The leadership said the draft needs targeted improvements and added that engagement would continue through future revisions. The group signaled support for progress.

Brad Garlinghouse also supported moving the legislation forward. He said the industry should remain at the table during markup talks. Garlinghouse said lawmakers can resolve issues through amendments. He added that continued debate remains better than prolonged uncertainty.

Venture leaders have also shared similar views. a16z Crypto said builders need clear rules to operate in the United States. Its leaders acknowledged the flaws in the current draft. However, they urged lawmakers to refine the text rather than delay action. Some supporters have warned that delays could weaken U.S. competitiveness.