White House Considers Abandoning Crypto Bill After Coinbase Pulls Support

The White House is reportedly reconsidering its support for the Digital Asset Market Clarity Act after Coinbase, a major player in the crypto space, withdrew its backing for the legislation. Coinbase CEO Brian Armstrong stated the draft bill would harm the industry by restricting decentralized finance, banning tokenized equities, and eliminating stablecoin rewards according to reports.

The bill, which aims to clarify the regulatory framework for digital assets, was expected to provide a clear pathway for the

crypto market. It was designed to define the roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and establish rules for stablecoins and DeFi as analysis shows.

The White House reportedly criticized Coinbase for its unilateral decision, calling it a "rug pull" against the administration and the broader industry. A source close to the Trump administration suggested that the administration may abandon the bill unless Coinbase agrees to compromise on stablecoin yield provisions that favor banking interests according to market reports.

Why Did This Happen?

Coinbase cited concerns over provisions that could weaken the CFTC while expanding the SEC's authority. The company argued that the bill would allow the government broad access to users' financial data and undermine the principles of decentralization according to Bitcoin Magazine.

Armstrong also criticized amendments that would eliminate stablecoin rewards, arguing they would entrench traditional banks while limiting competition from crypto-native payment systems. He stated that Coinbase would continue to push for a framework that treats crypto on a level playing field with traditional financial services as reported by Yahoo Finance.

How Did Markets Respond?

The market reaction to Coinbase's withdrawal of support was mixed. Shares of crypto companies including Coinbase, Circle, and Bullish dropped initially but have since recovered some ground according to Investopedia. Bitcoin and altcoins also gave back earlier gains but are moving higher again.

Industry reactions were split. Ripple CEO Brad Garlinghouse described the draft as a "massive step forward," while groups like the Digital Chamber and executives at Kraken signaled openness to amendments according to Hokanews.

What Are Analysts Watching Next?

The delay in passing the CLARITY Act has created a void in the market's expectations. Many had priced in a legislative win that would provide a regulatory moat for institutional capital inflows. The stalling of the bill has left the industry in a continued state of legal limbo according to Bitcoin Magazine.

Some analysts argue that the bill may not be passed before the 2026 midterms due to its divisive nature. Lawmakers are hesitant to take up such a complex issue during an election year. The current status quo of "regulation by lawsuit" is expected to continue for the foreseeable future according to market analysis.

The focus will now shift to the 2026 midterms. Lawmakers will be hesitant to take up such a divisive and complex issue during a campaign year, meaning the current status quo of "regulation by lawsuit" is here to stay for the foreseeable future. Investors should watch for whether Coinbase and its allies can successfully lobby for a "cleaner" version of the bill that removes the stablecoin yield bans and surveillance provisions according to market reports.

The path to regulatory legitimacy is not a straight line, but a series of high-stakes negotiations. Until Congress can produce a bill that satisfies both the "Disruptors" at Coinbase and the "Regulators" in the Banking Committee, the U.S. crypto market will continue to operate under a cloud of uncertainty according to market analysis.

Investors should pay close attention to the upcoming Senate Agriculture Committee sessions and any revised drafts of the bill that may emerge in February. However, the window for meaningful reform in 2026 is closing fast. The key takeaway for the market is that the price of clarity may currently be too high if it requires sacrificing the core tenets of decentralization and financial competition according to market reports.