Coinbase Pulls Support for CLARITY Act After Senate Rewrite

Coinbase, one of the largest U.S. cryptocurrency exchanges, has reportedly pulled its support for the CLARITY Act amid a Senate rewrite of the bill. The move comes after the Senate version of the bill included a provision that could ban stablecoin rewards. This development adds uncertainty to the regulatory landscape for digital assets and could influence the final shape of the legislation.

The CLARITY Act is a key legislative effort to establish regulatory clarity for digital assets in the U.S. A major point of contention is a proposed ban on stablecoin rewards. These rewards are interest-like incentives that exchanges share with users who hold stablecoins in their accounts. The rewards are particularly valuable during downturns in the cryptocurrency market.

Coinbase generates revenue from stablecoin rewards through its partnership with Circle, the issuer of USDC. A prohibition could directly impact the company's business model and user retention strategy. Regulators have expressed concerns that such rewards might resemble traditional interest-bearing accounts without proper oversight. However, Coinbase and others argue that stablecoin rewards offer innovation and utility in the digital asset ecosystem.

The CLARITY Act was first introduced in 2023 and has undergone multiple revisions in 2024 and 2025. The stablecoin rewards provision was added during a reconciliation process in October 2024. The bill is expected to face a final vote in early 2026.

Coinbase's potential opposition carries significant political weight. The company contributed approximately $1 million to President Donald Trump's inauguration and has supported numerous congressional candidates over recent election cycles. These contributions have given the company influence in shaping regulatory discussions.

Stablecoin rewards are used by approximately 35% of U.S. crypto investors as part of their investment strategy. If the ban is implemented, users may seek alternative yield-generating products or shift their holdings to offshore platforms. Analysts warn that the prohibition could reshape the competitive landscape of cryptocurrency exchanges in the U.S.

The regulatory debate is part of a broader global trend. Jurisdictions such as the European Union and the United Kingdom have introduced similar restrictions. Meanwhile, countries like Singapore and Switzerland offer more flexible regulatory approaches.

Why Did This Happen?

The conflict over stablecoin rewards reflects a broader regulatory debate between innovation and consumer protection. Banking groups have pushed for a ban on stablecoin rewards, arguing that such programs could draw significant funds out of the traditional banking system. They view stablecoin yield programs as a threat to financial stability.

On the other hand, crypto firms and industry advocates argue that stablecoin rewards represent a valuable financial product. They emphasize that existing safeguards, such as transparent reserve reporting, already provide some assurance to users.

Coinbase has also applied for a national trust banking charter, which would allow it to offer rewards with clearer legal footing. However, banking groups are pushing to close this regulatory pathway through the CLARITY Act.

How Did Markets Respond?

The potential prohibition on stablecoin rewards has raised concerns among crypto market participants. Coinbase is one of the largest U.S.-based exchanges to offer such rewards, and a full ban could directly impact its revenue. The company reported $247 million in stablecoin-related activity in the fourth quarter of 2025.

If the ban is implemented, users may migrate to offshore platforms that still offer stablecoin rewards. This could lead to a shift in user behavior and affect the overall liquidity and competitiveness of U.S. crypto exchanges.

Market analysts have highlighted several potential outcomes. These include platform migration, product innovation, market consolidation, and regulatory arbitrage. Some suggest that smaller platforms may struggle without reward programs, potentially leading to industry consolidation.

What Are Analysts Watching Next?

Analysts are closely monitoring the Senate Banking Committee's markup of the CLARITY Act, scheduled for January 15, 2026. The outcome of this vote could determine whether the bill moves forward with or without the stablecoin rewards provision.

Political pressure is increasing as both sides of the debate intensify their lobbying efforts. Anti-DeFi groups have launched advertising campaigns urging voters to support restrictions on DeFi activity, while the crypto industry has mobilized to defend stablecoin rewards.

The final version of the CLARITY Act could have long-term implications for how cryptocurrency platforms operate in the U.S. If Coinbase follows through on its warning, the bill may lose momentum or be revised to address industry concerns.

Investors are also watching the broader implications of the CLARITY Act for market structure, regulatory clarity, and consumer protection. The bill aims to establish clear definitions and jurisdictional boundaries between the SEC and CFTC for digital assets.

The outcome of this legislative battle will likely shape the future of digital asset regulation in the U.S. for years to come. Market participants continue to monitor developments as the bill moves through the Senate and faces final approval.