CLARITY Act Stalls Amid Coinbase Backlash Over Stablecoin Yield Bans

Crypto's moment of regulatory clarity is slipping away. The bipartisan CLARITY Act, poised to define SEC and CFTC roles in digital assets, has hit a major snag. Coinbase, once a key supporter, pulled its backing at the eleventh hour, citing draconian limits on stablecoin yields. This clash with banks and the White House has delayed Senate markup, leaving the industry in limbo.

The Digital Asset Market Clarity Act promised a framework for stablecoins, tokenized assets, and DeFi. But late amendments ignited fury. At the heart: stablecoin rewards. The bill bans passive yields on holdings—like interest on savings—but allows rewards for activity such as staking or liquidity provision. Coinbase sees this as a 'de facto ban.' Stablecoin yields generated over $1.3 billion for the exchange in 2025, mostly from USDC partnerships. CEO Brian Armstrong blasted it as bank-driven 'regulatory capture': 'It just felt deeply unfair... one industry would come in and get to do regulatory capture to ban their competition.' Per The Block, banks lobbied hard, fearing deposit flight to crypto platforms without FDIC insurance. It's not just yields. Coinbase flagged expanded SEC power over 'network tokens,' DeFi AML mandates that could force centralization, and curbs on tokenized equities. Blockchain Association CEO Kristin Smith warned the provisions risk 'sweeping in core DeFi infrastructure.' CoinDesk reports six industry players echoed these concerns, though not all oppose outright. The drama peaked when Coinbase withdrew support hours before the Senate Banking Committee's markup on January 15, 2026, prompting postponement. The White House fumed, dubbing it a 'rug pull,' with crypto czar David Sacks pushing for compromise. Reuters notes Republicans split on stablecoins, needing Democratic votes to advance. Banks like the American Bankers Association argue yields threaten financial stability by siphoning deposits. Crypto counters: these aren't insured deposits; it's competition.

The fallout rippled fast. Coinbase shares dipped toward $150 amid the uncertainty. Broader markets treaded water, with BTC hovering as investors eyed stalled regs. Without CLARITY, SEC enforcement lingers, chilling innovation. Stablecoin issuers face ambiguity, potentially curbing growth. A prolonged stalemate favors incumbents—banks keep deposits, crypto loses revenue streams. Yet, House passage of its version keeps hope alive, pressuring Senate action before midterms.

CLARITY isn't dead—talks continue, with White House mediating bank-crypto deals. A compromise on yields could revive it, delivering long-sought clarity. Armstrong's stance: 'No bill is better than a bad bill.' But time's ticking. If resolved, 2026 could cement U.S. leadership in crypto. Eyes on the Senate: will innovation win, or caution prevail?