Political Shockwaves: How Coinbase Derailed a Landmark Crypto Bill

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A single social media post from Coinbase CEO Brian Armstrong has sent Washington's crypto regulatory agenda into disarray. By publicly withdrawing his company's support for the proposed Clarity Act, Armstrong forced the U.S. Senate to cancel a scheduled committee vote. This episode underscores the significant political influence cryptocurrency exchanges now wield in the capital and highlights a fierce, multi-trillion-dollar battle between traditional banks and the digital asset industry.

The Senate Banking Committee had planned a Thursday vote on the Clarity Act, an extensive regulatory framework for the crypto sector spanning nearly 300 pages. The plan was scrapped following a critical post by Armstrong on the platform X, in which he stated Coinbase could "unfortunately not support the bill in its current form."

His opposition centered on three major flaws he identified in the legislation:

• Diminished CFTC Authority: The bill would weaken the Commodity Futures Trading Commission (CFTC), the regulatory body the crypto industry generally prefers.
• Ban on Stablecoin Rewards: New language would effectively prohibit crypto companies from offering customers any rewards or yields on stablecoin holdings.
• Excessive SEC Power: It would grant overly broad and expansive powers to the Securities and Exchange Commission (SEC).

Committee Chairman Tim Scott called off the hearing just hours after Armstrong's post went live. Senator Cynthia Lummis summarized the event, stating, "That was the thousandth cut in a death by a thousand cuts."

The Heart of the Dispute: Stablecoins and Banking's Core Business

At the core of this conflict is a fundamental question: Should cryptocurrency platforms be permitted to offer interest or interest-like rewards on customer stablecoin deposits? This practice directly threatens the deposit base of traditional banks. More than 3,000 banks have signed a petition organized by the American Bankers Association. They warn that allowing crypto firms to offer such products could pull "trillions away from local lending." Federal Reserve estimates suggest the potential contraction in credit availability could range from several hundred billion to as much as $1.2 trillion.

Armstrong argues for a level playing field, asserting that "crypto companies should be able to lend just like banks."

Ongoing Negotiations and a Revised Timeline

On January 17, Armstrong addressed rumors that the Trump Administration was considering a full withdrawal of support for the bill. He described the White House as "very constructive" and confirmed the administration had asked Coinbase to engage in direct negotiations with banking representatives.

"We've actually come up with some good ideas on how we can specifically support the smaller banks in this bill," Armstrong wrote. Senator Lummis has indicated a new committee vote could be scheduled for February or March.

Looking ahead, Coinbase is set to release its fourth-quarter and full-year 2025 financial results on February 12, 2026. In a recent bullish move, Goldman Sachs upgraded the company's stock to a "Buy" rating, assigning a price target of $303. The firm's analysts view the recent period of underperformance as an attractive entry point for investors.