Coinbase Withdraws Support for the CLARITY Act Amid Stablecoin Reward Ban

Coinbase has withdrawn support for the CLARITY Act, a key U.S. legislative proposal, due to provisions that would restrict stablecoin rewards. The move follows growing tensions between the crypto industry and traditional banking groups.

Stablecoins are a major revenue driver for Coinbase, with the firm reporting nearly $247 million in Q4 2024 from related operations. The GENIUS Act, passed earlier in 2025, allowed rewards for stablecoin holders via third-party platforms like exchanges, but the banking sector now seeks to close this loophole.

The U.S. Senate Banking Committee is set to address the issue in its upcoming meeting. Lawmakers face pressure from both sides, with the crypto industry warning that restrictions could weaken U.S. global competitiveness.

Why the Move Happened

Coinbase CEO Brian Armstrong has previously warned that banning stablecoin rewards could harm U.S. financial innovation and global standing. The firm's chief policy officer, Faryar Shirzad, has also highlighted the risk of falling behind China, which recently announced interest on its Digital Yuan.

The banking sector argues that stablecoin rewards could undermine traditional lending and pose systemic risks. It has pushed for stricter rules, including a potential ban on all reward mechanisms tied to stablecoin balances.

How the Market Is Reacting

The decision comes as stablecoin transactions reached a record $33 trillion in 2025, with USDC dominating the volume. This growth has been supported by pro-crypto policies under the Trump administration, including the Genius Act.

However, not all stakeholders see the same benefits. Banks point to the $360 billion annually generated from deposits and card fees, fearing that stablecoin rewards could eat into these margins.

What Analysts Are Watching

Industry experts are closely watching whether the Senate will allow third-party platforms to continue offering stablecoin incentives. A middle ground could involve limiting rewards to entities with banking licenses.

Analysts also note that if restrictions are imposed, crypto firms may find alternative ways to reward users, as seen in discussions among industry leaders.

Regulatory clarity remains a key concern, with Shirzad emphasizing the need to protect the GENIUS framework to ensure fair competition and innovation.