Coinbase Withdraws Support for Senate Crypto Legislation Amid Regulatory Concerns

Coinbase CEO Brian Armstrong announced on Wednesday, January 14, that the company can no longer support the Senate Banking Committee’s CLARITY Act draft. The decision came after a 48-hour review of the bill, which Armstrong said could leave the U.S. crypto industry in a worse position than the current regulatory environment.

Armstrong cited several concerns, including what he described as a de facto ban on tokenized equities and new restrictions on decentralized finance. He also noted that the bill grants the government broad access to users' financial data, a move he warned could undermine privacy and innovation.

The Senate Banking Committee is scheduled to hold a markup and vote on the bill on Thursday, January 15. The legislation aims to define regulatory oversight between the SEC and CFTC while establishing new disclosure requirements and clarifying digital asset classifications.

Why the Move Happened

Armstrong argued that the CLARITY Act draft would erode the authority of the CFTC, weakening its role in the regulatory landscape and making it subservient to the SEC. He also criticized amendments that would eliminate rewards on stablecoins, which he said could suppress competition and push users to offshore platforms.

The issue of stablecoin rewards has been a contentious point in the negotiations. Coinbase generates significant revenue from stablecoin-related programs and currently offers users up to 3.5% in rewards. Armstrong warned that banning these rewards could have a material impact on the company's business model.

How the Market Responded

Coinbase's decision has raised concerns about the bill's chances of passing in its current form. Industry observers note that the company has been a key voice in the crypto regulatory debate and its withdrawal of support could signal broader industry dissatisfaction with the proposed legislation.

Other stakeholders, however, have expressed support for the bill. Digital Chamber CEO Cody Carbone stated that the group remains committed to passing the legislation in 2026 and will continue to push for targeted improvements. Ripple CEO Brad Garlinghouse also voiced optimism that the bill could be revised to address concerns through the markup process.

What Analysts Are Watching

Crypto analysts are closely monitoring the Senate Banking Committee's markup process to see whether the bill will be revised to address Coinbase's concerns. The debate over stablecoin rewards, DeFi restrictions, and the division of regulatory authority between the SEC and CFTC is expected to play a key role in shaping the final version of the legislation.

Some analysts believe the bill could still pass, but with significant changes to its original draft. Others worry that the current version is unlikely to gain enough support from both the crypto industry and traditional financial institutions.

The outcome of the markup on January 15 will be a critical moment for U.S. crypto regulation. A revised bill could provide much-needed clarity for market participants, but if no compromise is reached, the industry may remain in a regulatory limbo for the foreseeable future.