The CLARITY Act and the Future of Stablecoin Rewards: A Tipping Point for Crypto Valuations?

The CLARITY Act of 2025, formally the Digital Asset Market Clarity Act, has emerged as a pivotal piece of legislation in the U.S. crypto landscape. By delineating regulatory responsibilities between the SEC and CFTC and introducing a three-tier classification system for digital assets, the Act aims to resolve years of ambiguity in crypto markets. However, its most contentious provision-regulating stablecoin rewards-has sparked fierce debate between crypto platforms like Coinbase and traditional banking institutions. For investors, this regulatory tug-of-war represents both a critical risk and a potential catalyst for long-term growth in the crypto sector.

The Stablecoin Rewards Dilemma: Coinbase's Strategic Crossroads

Stablecoin rewards, which allow users to earn interest on tokens like USDC held on exchanges, have become a cornerstone of Coinbase's revenue model. According to a report by , Coinbase's stablecoin-related income could reach $1.3 billion in 2025, driven by its partnership with Circle and its role in distributing a portion of the interest generated from stablecoin reserves. However, the CLARITY Act's proposed restrictions on such rewards-limiting them to regulated financial institutions-threaten to disrupt this revenue stream.

Coinbase has taken a firm stance, signaling a potential withdrawal of support for the Act if stablecoin rewards are curtailed beyond disclosure requirements. The exchange argues that these rewards are distinct from traditional bank deposits and are essential for fostering user engagement in crypto markets. Faryar Shirzad, Coinbase's chief policy officer, has warned that such restrictions could weaken U.S. competitiveness, particularly as nations like China offer state-backed digital currency incentives. This strategic resistance highlights Coinbase's balancing act: advocating for regulatory clarity while defending its business model against encroaching financial regulations.

Regulatory Clarity vs. Innovation: A Double-Edged Sword

While the CLARITY Act's broader framework is expected to attract institutional capital by reducing regulatory uncertainty, its treatment of stablecoin rewards introduces a key risk. Grayscale's 2026 Digital Asset Outlook notes that institutional adoption hinges on clear, consistent rules, with the Act's passage projected to unlock significant inflows from advised wealth and institutional investors. However, Coinbase's lobbying efforts to preserve stablecoin rewards underscore a tension between regulatory oversight and innovation.

The SEC's recent guidance clarifies that certain stablecoins-those backed by low-risk, liquid reserves and redeemable on demand-do not qualify as securities. This aligns with Coinbase's argument that stablecoin rewards are a market-driven feature rather than a banking activity. Yet, the CFTC's role in overseeing digital commodities under the Act could complicate this narrative, as the agency may prioritize consumer protection over innovation incentives.

Global Context: U.S. Policy in a Fragmented Regulatory Landscape

Internationally, the U.S. approach to stablecoin regulation is part of a broader global trend. The EU's Markets in Crypto-Assets (MiCA) regulation, implemented in 2025, imposes strict technical standards on stablecoins, while Hong Kong and Singapore are developing frameworks that balance innovation with systemic risk mitigation. The CLARITY Act's influence is evident in these efforts, as jurisdictions seek to harmonize rules while avoiding regulatory arbitrage.

However, the U.S. faces a unique challenge: maintaining its edge in a global crypto race. Coinbase's warnings about China's state-backed digital currency incentives highlight the stakes. If the CLARITY Act's final version restricts stablecoin rewards, U.S. platforms risk ceding ground to foreign competitors who offer more favorable terms. This dynamic could accelerate the migration of crypto activity to jurisdictions with less restrictive policies, undermining the Act's goal of fostering domestic innovation.

Quantifying the Impact: Coinbase's Financial Exposure

Coinbase's financial metrics underscore the high stakes. In 2024, the platform reported 105 million registered users and $6.2 billion in revenue, with stablecoin rewards contributing significantly to its growth. A restriction on these rewards could erode user engagement and revenue, particularly as competitors like Binance and Cash App offer alternative yield-generating products.

Yet, the Act's institutional adoption benefits cannot be ignored. John D'Agostino, Coinbase's head of institutional strategy, has emphasized that regulatory clarity will enable "institutions outside of crypto-native who are less comfortable with regulatory risk" to engage with digital assets. This suggests that even if stablecoin rewards are curtailed, the broader regulatory framework could offset short-term losses by attracting new capital.

The Tipping Point: Risk or Opportunity?

For investors, the CLARITY Act represents a tipping point. If passed in its current form, it could catalyze a new era of institutional adoption, driving crypto valuations higher. However, Coinbase's potential withdrawal of support-and the broader industry's resistance to stablecoin restrictions-introduces regulatory risk. The 68–70% probability of the Act's passage in 2026 suggests a likely resolution, but the final terms will determine whether this becomes a tailwind or headwind for the sector.

In the short term, Coinbase's strategic adjustments-ranging from lobbying to product innovation-will be critical. Long-term, the Act's success will depend on its ability to balance innovation with stability, ensuring that the U.S. remains a global leader in crypto markets. For now, the crypto sector watches closely, aware that the outcome of this regulatory battle could shape its trajectory for years to come.