Coinbase Denies White House Standoff, Targets Stablecoin Compromise for CLARITY Act

U.S. cryptocurrency exchange Coinbase has reaffirmed its support for the CLARITY Act, but warned that it may withdraw backing if the final version includes restrictions on stablecoin yield and decentralized finance (DeFi) provisions. Coinbase CEO Brian Armstrong said on January 17 that negotiations with the White House and banking groups are ongoing, dismissing earlier reports of a rift between the administration and the exchange.

The CLARITY Act, a major piece of U.S. crypto market structure legislation, has been delayed as lawmakers and industry stakeholders seek a compromise on stablecoin incentives. The Senate Banking Committee postponed a scheduled markup session, with a new date yet to be set.

The bill aims to establish clear regulatory guidelines for digital assets but faces criticism from both crypto firms and banks over its potential impact.

Coinbase has been a vocal opponent of provisions that would ban stablecoin issuers from offering yield to users. Stablecoins have become a major revenue source for the exchange, contributing nearly $247 million in Q4 2024. The firm argues that restricting these incentives could harm DeFi growth and limit financial innovation.

Why Did This Happen?

The CLARITY Act seeks to address concerns from traditional banking groups, which argue that stablecoin rewards could siphon trillions in deposits from the banking system. The banking industry has long sought to close a loophole in the earlier GENIUS Act, which banned stablecoin issuers from offering interest but allowed third-party platforms like exchanges to provide rewards.

Coinbase CEO Brian Armstrong criticized the current draft of the bill, calling it "catastrophic" for consumers and innovation. He stated that the bill includes a de facto ban on tokenized equities and imposes broad restrictions on DeFi. These provisions, he argued, could give traditional banks an unfair advantage and undermine the principles of decentralized finance.

How Did Markets React?

The standoff between Coinbase and the White House has created uncertainty for the crypto industry and investors. The White House reportedly considered withdrawing support for the CLARITY Act after Coinbase's public criticism, according to a report by Fox Business journalist Eleanor Terrett. The administration views Coinbase's decision as a "rug pull" that undermines broader industry support.

Despite the tensions, Armstrong denied any rift with the White House, emphasizing that the administration has remained constructive in discussions. The White House has reportedly encouraged Coinbase to work with banking groups to find a compromise, a process that is still ongoing.

What Are Analysts Watching Next?

The CLARITY Act's future remains uncertain as the Senate Banking Committee continues to negotiate key provisions. Some analysts believe the bill could be delayed until as late as 2027 or 2029, with the 2026 U.S. midterm elections adding to the complexity. The ability of lawmakers to reach a compromise on stablecoin yield, DeFi regulations, and tokenized assets will be critical to the bill's passage.

Industry groups remain divided on the CLARITY Act. While Coinbase and other DeFi supporters argue that the bill threatens innovation, companies like Ripple and Kraken continue to back it. The outcome of these negotiations will shape the regulatory landscape for digital assets in the U.S. and impact the competitiveness of the crypto sector globally.

Investors are closely watching developments as the CLARITY Act's passage remains in flux. The resolution of key issues—such as stablecoin yield, DeFi freedom, and tokenized assets— will determine the future of crypto regulation and its impact on market participants.