The U.S. Clarity Act, once viewed as a pivotal piece of legislation for the cryptocurrency industry, has encountered significant hurdles. Following widespread industry opposition, including the withdrawal of support from major players like Coinbase, the bill's progress in the Senate has been indefinitely postponed. This turn of events highlights the profound disagreements concerning decentralized finance (DeFi), the authority of regulatory bodies, the tokenization of equities, and proposed restrictions on stablecoin yields, which are seen as favoring traditional banking institutions.
The U.S. market structure bill, known as the Clarity Act, which was anticipated to be a significant development for the crypto industry in early 2026, experienced a dramatic shift this week. Instead of providing the expected regulatory clarity, the bill unraveled shortly before a scheduled vote in the Senate Banking Committee. This occurred after key industry figures, including Coinbase, rescinded their support. Consequently, the review of the bill has been indefinitely delayed.
Reasons for the Legislative Setback
The Clarity Act was initially conceived to address the fragmented nature of U.S. digital asset regulation and the absence of clear jurisdictional boundaries. The industry had placed considerable optimism on the bill, believing it would put an end to the Securities and Exchange Commission's (SEC) "regulation by enforcement" approach and establish the Commodity Futures Trading Commission (CFTC) as the primary regulator for crypto markets.
However, this positive momentum reversed rapidly within 48 hours of the Senate Banking Committee releasing the latest draft of the bill. Coinbase CEO Brian Armstrong stated that, following an internal review, the revised provisions not only failed to resolve existing issues but also pushed many previously legal business activities to the brink of illegality.
Armstrong was unequivocal in his assessment, suggesting that an unfavorable bill would be worse than no bill at all. As Coinbase and several prominent industry groups withdrew their support, the Senate was compelled to cancel a crucial vote that had been scheduled for mid-January, casting significant doubt on the bill's future.
Conflicting Perspectives: Industry Accusations vs. Lawmaker Responses
Coinbase's strong opposition is focused on four specific provisions within the draft that the industry perceives as detrimental to innovation. In response, Senate Republicans issued a "Myth vs. Fact" memorandum to counter these criticisms. Both sides present vastly different interpretations of the bill's intent and impact, with the primary points of contention outlined below:
Decentralized Finance (DeFi) and Privacy Concerns
Industry View: The bill imposes what is described as "hostile" regulation on decentralized finance (DeFi). By holding developers responsible for protocol activities, the rules are considered technically unfeasible and are seen as granting the government extensive access to users' financial records, thereby posing a significant threat to privacy.
Lawmaker Response: Lawmakers contend that these measures are essential for combating money laundering and illicit financial activities. They emphasize that the bill clearly distinguishes between developers who merely publish code and intermediaries who manage user funds, asserting that "code is protected, but misconduct is not."
Expansion of SEC Authority and Diminished Role of the CFTC
Industry View: The industry had hoped the bill would limit the SEC's enforcement actions. Instead, the latest draft fails to establish clear boundaries and effectively marginalizes the CFTC, relegating it to a subordinate role and allowing the SEC to continue expanding its jurisdiction.
Lawmaker Response: Official documents indicate that the bill utilizes existing securities laws to clarify the distinction between securities and commodities. It also establishes a joint SEC-CFTC advisory committee to coordinate oversight, with the aim of closing regulatory gaps rather than expanding authority.
Restrictions on Tokenized Equities
Industry View: Certain provisions are viewed as effectively banning tokenized equities. The exchange argues that this would impede the modernization of financial markets and potentially drive a U.S.-led tokenization boom to overseas jurisdictions.
Lawmaker Response: Lawmakers state that these restrictions are designed to protect investors and prevent a recurrence of failures like FTX, ensuring that all digital assets resembling securities are subject to stringent disclosure and anti-fraud requirements.
Banking Industry Influence: The Ban on Stablecoin Yields
Beyond the broader regulatory disagreements, the provision that has generated the most significant backlash from the crypto community involves restrictions on stablecoins. This element is widely perceived as the result of intense lobbying efforts by traditional banks.
Central to this controversy is a clause that imposes a ban on stablecoin rewards or yields.
Banks' Concern: The CEO of Bank of America has cautioned that allowing stablecoins to offer yields could lead to deposit outflows totaling as much as $6 trillion. For decades, banks have profited from low-interest deposits by investing in U.S. Treasuries, generating substantial annual profits for the largest institutions. From the perspective of the banking industry, this ban serves as a protective measure, preventing Treasury yields from being passed on to users and safeguarding traditional profit margins from fintech competition.
A Regulatory Barrier: This provision prohibits crypto platforms from offering any yield on stablecoins. Coinbase has explicitly described this as a "handout to banks," arguing that lawmakers are employing regulation to eliminate competitors and shield banks from the pressures of fintech innovation.
Impact on Users: For individual investors, this ban eliminates a legitimate avenue for passive income, significantly reducing the attractiveness of holding stablecoins and undermining one of the practical use cases of cryptocurrency.
Coinbase asserts that sacrificing technological innovation to protect incumbent financial institutions contradicts the principles of free-market competition and risks perpetuating inefficiency rather than fostering a more open and competitive financial system.
Senate's Position and the Path Forward
In the face of coordinated industry opposition, Senate Banking Committee Chairman Tim Scott attempted to de-escalate tensions. He characterized the setback as a temporary pause rather than a complete collapse, emphasizing that good-faith negotiations are ongoing. Republicans have also sought to address criticisms by releasing materials debunking "myths," arguing that the bill has been misinterpreted and highlighting that it reflects years of bipartisan work aimed at enhancing national security and consumer protection.
However, the significant divide between lawmakers and the crypto industry—particularly regarding the definition of DeFi and the permissibility of stablecoin yields—persists, making a near-term consensus unlikely.
As the cryptocurrency industry continues its gradual integration into the mainstream, it finds itself increasingly navigating the complexities of traditional financial interests, regulatory and legislative obstacles, and the competing agendas of various stakeholders. In this nascent and highly uncertain phase, every policy decision carries disproportionate weight. The crucial question is which forces are genuinely acting in the long-term interest of the industry and its decentralized ethos, and which are merely leveraging investor protection to maintain the dominance of legacy finance.