Coinbase Faces Criticism for Withdrawing Support for US CLARITY Act

Coinbase’s unexpected pullback from the US CLARITY Act has sparked a fresh debate in the crypto industry, with many criticizing the exchange. While Coinbase cites policy concerns, critics argue that the decision is driven by the rising competition from Wall Street-backed tokenized firms. What started as a struggle for crypto regulation clarity is now being seen as a power play.

CLARITY Act Controversy: Citron Questions Coinbase’s Pullback

While the Senate has once again delayed the CLARITY Act markup hearing, the focus has now shifted to Coinbase. Critics are questioning the exchange’s motives behind its sudden withdrawal of support for the market structure bill.

Citron Research criticizes Coinbase’s decision, claiming that the exchange is concerned about competition rather than the bill itself. Citron noted in an X post,

The critic posits that Coinbase CEO Brian Armstrong is opposing the CLARITY Act not because it harms crypto, but because it could threaten the exchange’s business interests. The exchange is allegedly concerned about the growing competition from Securitize, a tokenized securities firm. According to the criticism, Coinbase doesn’t want the CLARITY Act rules to help competitors grow. Citron added,

What Brian Armstrong Has to Say?

Despite this backlash, Armstrong asserts that Coinbase withdrew its support for the CLARITY Act due to its ability to harm consumer protection and market competition. He stated, “The high level principle is that you can’t really have banks come in and try and kill their competition at the expense of the American consumer.”

Armstrong added that crypto exchanges, including Coinbase, negotiated with the lawmakers until the final stages. However, the detailed review released late Monday night uncovered provisions that could harm the industry, stated Armstrong.

The Coinbase CEO believes that letting the crypto bill pass in its current form may have a “catastrophic” impact on the broader crypto industry and consumers. He cites this as the major reason for his exchange’s decision to pullback support. With the move, he wanted the lawmakers to revise the bill.