Coinbase Faces Political Backlash After Policy Reversal

Coinbase US19260Q1076

A surprising strategic shift by Coinbase CEO Brian Armstrong has ignited a public dispute with the Trump administration, sending the company's shares into a steep decline. The conflict centers on Coinbase's withdrawal of support for the proposed CLARITY Act, a move that has drawn sharp criticism from Washington and alarmed investors.

The immediate financial impact has been severe. Over the past week, Coinbase stock has plunged 22.78 percent, with its price currently standing at 197.58 euros. Market experts attribute the sell-off to a combination of this political friction and a challenging broader environment, including trade tensions with the EU and volatility in the Japanese bond market.

In response, several prominent Wall Street firms have revised their price targets downward:
* Piper Sandler lowered its target from $350 to $270.
* Cantor Fitzgerald reduced its target from $459 to $320.
* Needham & Company adjusted its target from $400 to $290.
* JPMorgan made a slight revision, moving from $404 to $399.

Despite these cuts, the overall analyst consensus remains a "Moderate Buy" rating, suggesting that long-term prospects for the company are still viewed as viable despite the current turmoil.

The Heart of the Dispute: Stablecoin Revenue

Beyond the political rhetoric lies a significant economic stake for Coinbase. The core of the disagreement involves provisions in the CLARITY Act that would prohibit interest payments on stablecoin reserves. Traditional banking lobbyists are pushing for this rule to prevent crypto platforms from directly competing with conventional deposit accounts.

For Coinbase, the financial implications are substantial. In the third quarter of 2025, the company generated $355 million in revenue linked to stablecoins. This was driven by high interest rates and the holding of $15 billion in USDC on its platform. Kara Calvert, Coinbase's head of U.S. policy, has stated that the ability to offer yield incentives is "absolutely critical" for maintaining competitiveness.

A Defensive Stance from Davos

Attempting to address the controversy at the World Economic Forum in Davos, Brian Armstrong defended his decision. He argued that the current draft of the legislation conceded too much to the traditional finance sector ("TradFi") and expressed his intention to engage with banking executives to seek a compromise that would benefit both sides.

The reaction from the White House was swift and pointed. Patrick Witt, Executive Director of the President's Advisory Council on Digital Assets, publicly warned that Armstrong's stance constitutes a risky gamble. He noted that the opportunity to reject the bill only exists due to Donald Trump's election victory and his appointment of pro-crypto officials. According to media reports, there is considerable anger within the administration, with some viewing Coinbase's unilateral move as a betrayal of a shared policy goal.

What Comes Next?

The path forward is fraught with uncertainty. The Senate Agriculture Committee has scheduled a hearing on the legislative draft for January 27, and it is proceeding despite Coinbase's opposition. Government officials have indicated that the bill could be advanced even without the company's backing.

Investor attention is now turning to February 12, 2026. After the market closes, Coinbase is set to release its fourth-quarter and full-year results. This earnings report will be a crucial test, requiring the company to demonstrate that its core operations are robust enough to withstand the ongoing political storm.