Senate Democrats Return to Negotiating Table on the CLARITY Act

U.S. Senate Democrats are reportedly set to reopen talks with representatives from the cryptocurrency industry on Friday, regarding the CLARITY Act. This follows a last-minute postponement of a key Senate Banking Committee hearing on sweeping digital asset legislation. The delay came after Coinbase, the largest U.S.-based crypto exchange, withdrew its support for the draft legislation, citing concerns over stablecoin rewards programs and what it viewed as excessive authority granted to the SEC according to reports.

The call to resume negotiations follows Wednesday night's abrupt cancellation of the committee's planned markup of the long-negotiated crypto market structure bill. That plan unraveled late Wednesday after Coinbase CEO Brian Armstrong said the company could not support the current version of the legislation. Shortly thereafter, Senate Banking Committee Chair Tim Scott, R-S.C., postponed the hearing.

Lawmakers and industry participants say negotiations are far from over. Senate Banking Committee and Senate Agriculture Committee members are expected to join Friday's call, along with representatives from crypto policy advocacy groups in Washington. Both committees have overlapping jurisdiction over the bill, which outlines regulatory roles for the SEC and CFTC in crypto markets as reported.

Why Did This Happen?

A major point of contention in recent negotiations has been whether stablecoin issuers should be permitted to offer rewards or yield programs. This issue has drawn pushback from bank lobbyists and some Democrats concerned about consumer protection and competition with traditional deposits according to analysis.

Coinbase CEO Brian Armstrong argued that banks are trying to "kill their competition" with the crypto market structure legislation. "Crypto companies should be allowed to compete and offer loans just like banks," Armstrong said in a statement. His comments intensified scrutiny of the bill and led to Coinbase withdrawing support.

The Banking Committee had been scheduled to hold an all-day session Thursday to debate amendments and vote on whether to advance the bill. That plan unraveled late Wednesday after Coinbase CEO Brian Armstrong said the company could not support the current version of the legislation according to reports.

What Are Analysts Watching Next?

Despite the setback, several lawmakers involved in the negotiations said discussions will continue. In a post on X, Sen. Cynthia Lummis, R-Wyo., a leading crypto advocate in the Senate, said lawmakers were "closer than ever" to reaching agreement. "Everyone is still at the negotiating table, and I look forward to partnering with [Chairman Scott] to deliver a bipartisan bill the industry — and America — can be proud of," Lummis wrote Thursday in her post.

Industry reaction to Coinbase's withdrawal has been mixed. While Armstrong's comments intensified scrutiny of the bill, other crypto executives and advocacy groups urged lawmakers to keep pushing forward. Kraken co-CEO Arjun Sethi said abandoning negotiations now would worsen regulatory uncertainty for U.S. crypto firms according to analysis.

Some analysts see the delay as a strategic pause, with Benchmark's Mark Palmer saying it could help lawmakers build broader bipartisan support and ultimately strengthen what he called a potentially historic overhaul of U.S. financial regulation as reported. Others are more doubtful: TD Cowen warned that bridging Democratic demands and Coinbase's objections may be difficult, especially since some disputed provisions were already concessions to Democrats according to analysis.

The Senate Agriculture Committee is still expected to hold a hearing on the legislation on January 27, after previously pushing back its own earlier session. Ultimately, both committees' work would need to be merged before the bill could advance to the full Senate according to reports.

The Senate Banking Committee has delayed markup of a bipartisan crypto market structure bill, adding to earlier postponements by the Agriculture Committee and extending uncertainty around the legislation's timeline. Announced late Wednesday, Senate Banking Committee Chair Tim Scott issued a statement saying he had spoken with leaders across the crypto industry, the financial sector, and both parties in Congress, reaffirming that negotiations were continuing in "good faith." according to the statement

The bill aims to define regulatory jurisdiction for crypto between the Securities and Exchange Commission and the Commodity Futures Trading Commission, as well as establish a federal framework for overseeing digital-asset markets. If enacted, it would be the first comprehensive federal statute codifying crypto market structure according to analysis.

The lead-up to this point follows "months of serious bipartisan negotiations and real input from innovators, investors, and law enforcement," Scott said. Those efforts, he added, were being made "to deliver clear rules of the road that protect consumers, strengthen our national security, and ensure the future of finance is built in the U.S." as reported.

The Senate Agriculture Committee initially slated a markup for the bill on Thursday to coincide with a markup of the same bill by the Senate Banking Committee, which is still to go ahead. The market structure bill under consideration in the Senate is separate from the House's CLARITY Act, which it passed in July, due to procedural rules according to reports.

Requests for ethics, stablecoin yield changes are among the changes that lawmakers and lobbyists are pushing to include. A number of Democratic Senators are pushing for conflict-of-interest guardrails in the bill, with provisions to prohibit public officials, including President Donald Trump, from profiting from any connections to crypto companies according to analysis.

Bank lobbyists have also pushed for a ban on third-party platforms, such as crypto exchanges, from offering stablecoin yields after the GENIUS Act prohibited issuers from doing so. Crypto lobby groups and companies have pressed for lawmakers to exclude software developers and non-custodial platforms from being classified as intermediaries, and therefore subject to finance rules according to reports.

How Did Markets React?

Crypto wants its way—even if it means near-term pain. Fresh disagreements over how crypto should be regulated have undercut early 2026 "we are so back" vibes. While there was a rally in market prices earlier this week, that more recently has stumbled as the Clarity Act, legislation that seeks to create a regulatory framework for the industry, stalled in Washington according to analysis.

Shares of crypto companies including Coinbase, Circle, and Bullish took hits following the news, but appear to be recouping some ground. Bitcoin and altcoins, including Ethereum and Solana, also gave back earlier week gains but are moving higher according to market data.

Coinbase CEO Brian Armstrong said on social media Wednesday evening that he was pulling support for the latest text of the bill due to "too many issues." Such industry response "proves they just are not ready," Senator Cynthia Lummis, a committee member, said in a post on X. "While I am deeply disappointed, I am committed to taking this feedback and partnering with the industry to deliver a product that helps them thrive," Lummis added according to her post.

Armstrong replied "Agreed, and thank you!" to her post. The delay could potentially derail the legislation, which may be harder to pass this year ahead of midterm elections according to analysis.

The industry has been pushing for market-structure legislation for years to protect itself against unfriendly presidential administrations. Under President Joe Biden, many crypto exchanges, including Coinbase, were sued by the Securities and Exchange Commission, which accused them of running unregistered exchanges, clearing houses and broker dealers according to reports.

The House passed its own market-structure legislation last year, and now the Senate Banking Committee and the Senate Agriculture Committee have to mark up their separate versions of the bill. Then the text has to be merged, and reconciled with the House version according to analysis.