Fang Zichuan takes you through｜Coinbase backstabs at the last minute, why the U.S. "Clarity Act" regulatory bill stumbles before the finish line

Fang Zitian observes that the United States cryptocurrency regulation legislation faces a major turning point again. The much-anticipated “Digital Asset Market Clarity Act” was suddenly postponed indefinitely on the eve of the Senate Banking Committee’s scheduled line-by-line review. Behind this dramatic reversal are Coinbase, the largest cryptocurrency exchange in the U.S., backing out at the last minute, and the reality of conflicting interests that cannot be reconciled.

Why did Coinbase CEO Brian Armstrong suddenly turn hostile?

The trigger for the incident began this Wednesday. Coinbase CEO Brian Armstrong issued a statement on social platform X, announcing the withdrawal of support for the “Clarity Act” draft. Armstrong’s words were unequivocal, directly pointing out that the new draft is riddled with issues and causes substantial harm to the industry.

According to Armstrong’s criticism, the bill, originally intended to establish regulatory order, actually contains several concerning provisions: de facto restrictions on the development of tokenized stocks, prohibitive regulations on DeFi, expanded government access to personal financial records, weakened oversight authority of the U.S. Commodity Futures Trading Commission (CFTC), and limitations on stablecoin yield mechanisms.

As a key participant at the Washington negotiation table, Coinbase’s opposition undoubtedly dealt a heavy blow to the bill’s progress. This also marks a fundamental shift in the industry’s attitude toward regulation.

Stablecoin yield mechanisms become the last straw

Fang Zitian found that the real issue with the bill is not all the clauses listed in Armstrong’s article, but a specific topic: whether to allow stablecoin yield mechanisms.

This controversial regulation successfully swayed the positions of several members of both parties. Sources revealed that the opposition from the banking sector was so strong that even Senate Banking Committee Chairman Tim Scott, a Republican, could not ensure that all Republicans would vote in favor. The banking sector’s strong opposition to stablecoin yields stems from the concern that this mechanism could undermine the traditional banking deposit base.

On Wednesday, Tim Scott issued a statement confirming the postponement of the bill but did not disclose a new review date. In his statement, he said he had extensive discussions with leaders in the cryptocurrency industry, financial sector, and bipartisan colleagues, and that the bill had been the result of months of bipartisan negotiations. However, this seemingly optimistic statement cannot hide the difficulty of resolving all parties’ objections.

Behind the banking industry’s pressure and Democratic political calculations

In addition to the direct confrontation between the banking sector and the cryptocurrency industry, the bill also faces political struggles from another dimension. Democratic lawmakers insist on including strict ethical provisions in the bill to restrict government officials from profiting from the cryptocurrency industry.

External interpretations of this clause point directly to Trump and his family’s cryptocurrency ventures, especially the recently active World Liberty Financial project. This ethics proposal was repeatedly resisted by the White House during negotiations because the regulations would directly touch on the current government’s own cryptocurrency activities.

Tim Scott later stated that this issue has been deemed to fall under the jurisdiction of the Senate Ethics Committee and is not within the scope of the Banking Committee. This statement effectively puts a halt to the political dispute but also highlights the importance of ethical issues in the legislative process.

The prospects of US cryptocurrency regulation legislation

Fang Zitian believes that the symbolic significance of this legislative setback far exceeds the surface event itself. The cryptocurrency industry has invested astronomical amounts of political donations and lobbying resources over the years to push for regulation legislation, hoping that the “Clarity Act” would become a milestone in US cryptocurrency compliance regulation. Now, it has stumbled just before the finish line.

The strong opposition from the banking sector, Democratic political persistence, internal conflicts within the Republican Party, and the unclear stance of the Trump administration all contribute to the current deadlock. Notably, the Senate Agriculture Committee has also postponed related bills until the end of the month for review, and there remains a possibility of merging the bills for a joint pass.

However, the setback in the Senate Banking Committee undoubtedly casts a shadow over the prospects of US cryptocurrency legislation. Negotiations in the coming weeks will determine whether this bill can turn the tide or become another failed attempt at regulatory reform.