Senate Banking Committee Postpones CLARITY Act Markup After Crypto Industry Backlash

The U.S. Senate Banking Committee has postponed the markup of the CLARITY Act, a proposed digital asset market structure bill, following strong industry pushback led by major crypto firms. The delay comes as the crypto industry expresses deep concerns over the bill's current form, particularly around stablecoin yield restrictions and DeFi oversight according to industry reports.

Coinbase CEO Brian Armstrong stated the firm can no longer support the bill, citing issues including de facto bans on tokenized equities and restrictions on decentralized finance. Coinbase also warned that the bill, as written, could weaken the Commodity Futures Trading Commission while expanding the Securities and Exchange Commission's authority as reported.

The Senate Banking Committee's chairman, Tim Scott, emphasized ongoing bipartisan negotiations and highlighted the importance of achieving a consensus before moving forward with the bill according to Bloomberg.

Why Did This Happen?

Coinbase, one of the leading crypto exchanges in the U.S., withdrew its support for the CLARITY Act after reviewing the latest Senate draft. The firm's CEO criticized the draft for being harmful to the U.S. crypto industry and expressed a preference for no bill over a bad bill as stated.

A major point of contention is the restriction on stablecoin rewards. Coinbase currently offers interest on user balances, which has become a significant revenue source. Armstrong argued that such restrictions could weaken the U.S. dollar's position in global crypto markets and create an unfair advantage for offshore platforms according to analysis.

The banking sector, meanwhile, supports these restrictions, arguing that yield-bearing stablecoins could siphon deposits away from traditional banks and reduce lending as reported.

How Did Markets React?

The uncertainty surrounding the CLARITY Act has impacted market sentiment. Coinbase shares fell after the company announced its withdrawal of support, with some analysts warning of potential regulatory uncertainty for the U.S. crypto sector according to market analysis.

Other major crypto players, such as Ripple and Coin Center, have expressed support for the bill despite its flaws, arguing that a clear regulatory framework is essential for the industry's growth according to industry reports.

Senator Cynthia Lummis responded to Coinbase's concerns by suggesting that the industry's resistance to the bill proves it is not yet ready for regulation as Bloomberg reported.

What Are Analysts Watching Next?

With the markup now delayed, analysts are focusing on whether key amendments can be negotiated to satisfy both industry players and traditional financial institutions. A revised version of the bill may include changes to stablecoin yield provisions, DeFi oversight, and regulatory authority distribution according to industry analysis.

The U.S. Securities and Exchange Commission (SEC) has also weighed in, with Chair Paul Atkins calling the week a turning point for crypto regulation. He emphasized the need for clear rules that define the SEC and CFTC's roles and provide consistent oversight as reported.

Industry experts warn that without a resolution, the U.S. could fall behind other global markets in terms of crypto regulatory clarity. This could lead to increased competition from offshore platforms that offer more favorable conditions for digital assets according to analysis.

The next steps in the legislative process remain unclear. The Senate Banking Committee has not yet set a new markup date, while the Senate Agriculture Committee also postponed its own markup to the end of January as reported.

Investors and market participants are now closely watching whether a compromise can be reached. If the CLARITY Act fails to pass, it could delay meaningful regulatory reform for the U.S. crypto industry until at least 2027 according to market projections.