XRP and ETH on Edge as White House Threatens to Stall Clarity Act

The U.S. cryptocurrency regulatory landscape faces a major challenge as the Digital Asset Market CLARITY Act stalls in the Senate after leading industry participants, including Coinbase, withdrew support for the revised bill. The legislation, which had passed the House during last summer's 'Crypto Week,' was set for a markup hearing this week but was postponed following the industry's rejection of key provisions.

Coinbase CEO Brian Armstrong highlighted concerns over provisions in the bill that he argues would restrict innovation in tokenized equities and limit rewards on stablecoins. These changes, he said, would be materially worse than the current regulatory environment.

The withdrawal of support from major industry players has delayed the bill indefinitely, creating uncertainty for companies and investors alike. The outcome of the negotiations will determine whether the U.S. can finalize a national framework for crypto markets or remain behind other major regions that already operate under unified regulatory rules.

Why Did This Happen?

The revised version of the CLARITY Act introduced provisions that Coinbase and other crypto companies believe could weaken core parts of the crypto market structure. These include restrictions on tokenized equities and expanded government access to DeFi transaction data.

The bill also seeks to clarify the roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in regulating digital assets. However, the current Senate version has expanded the SEC's authority over crypto markets, a move that Coinbase warned could revive regulatory uncertainty.

Another point of contention is the ethics provisions that would bar senior government officials, including the president, from profiting from crypto ventures. While lawmakers like Senate Banking Committee Chair Tim Scott acknowledged the importance of such safeguards, the White House has pushed back on the proposal.

How Did Markets React?

The uncertainty surrounding the CLARITY Act has already had a noticeable impact on the crypto market. Shares of crypto companies, including Coinbase, Circle, and Bullish, initially dipped following the news but have since recovered some ground.

Bitcoin and altcoins, including Ethereum and Solana, also gave back earlier gains but are still trading higher. However, the price action of XRP and Ethereum has been mixed, with ETF inflows showing signs of both strength and weakness.

Spot XRP ETFs recorded $38.07 million in inflows on their ninth week of trading, a decline from the November peak of $243 million. Despite this, the net assets of these ETFs have topped $1.47 billion, representing 1.16% of the total XRP market cap.

Ethereum ETFs, by contrast, have seen stronger inflows, with $130 million recorded on Tuesday alone. BlackRock's ETHA was the largest contributor, attracting $53.3 million after four consecutive days of outflows.

What Are Analysts Watching Next?

Analysts are closely monitoring the outcome of the CLARITY Act negotiations, as well as the broader market implications of ETF inflows and institutional demand. Steven McClurg, CEO of Canary Capital, believes XRP could be building a base despite flat price action and expects ETF inflows to continue to flow into XRP ETFs, potentially reaching $5 to $6 billion by the end of 2026.

On-chain data for Ethereum also suggests a bullish continuation, with ETF inflows and whale activity reinforcing the upward trend. The MVRV 30-day metric for Ethereum has turned positive, indicating a shift from accumulation to markup .

While the market is currently in a de-risking phase, some analysts believe that the transition from retail to institutional ownership of XRP and Ethereum could eventually lead to a price breakout. However, this will depend on regulatory clarity and the overall stability of the broader market.