“After reviewing the Senate Banking draft text over the last 48 hours, Coinbase unfortunately can’t support the bill as written.”[1] On January 14, 2026, Brian Armstrong, CEO of Coinbase, made this declaration on X. It was not without consequence, as it prompted the Senate Banking Committee to postpone its markup of the CLARITY Act, scheduled for the following day.[2] The bill had been the product of years of lobbying by major crypto firms, including Coinbase, and Armstrong’s withdrawal of support exposed divisions within the industry and uncertainty about whether the legislation could secure enough votes in the Senate.[3]
This conflict, while formally about how Congress should regulate digital assets, (1) is rooted in the technological and economic purposes for which digital assets were originally designed. Thus, (2) although the current legislative efforts surrounding the CLARITY Act aim to provide a much-needed regulatory framework for digital assets and crypto transactions in the United States, (3) the present divisions and stalemate over the Senate version of the bill, particularly in the debate over stablecoins, illustrate how these competing interests come into direct conflict in practice.
- The Structural Divide Between Digital Assets and Traditional Banking
Cryptocurrencies are digital assets relying on blockchain technology,[4] “in which a distributed digital ledger is used to chronologically and publicly record transactions between two parties, proficiently, verifiably and permanently.”[5] This technology is underpinned by cryptographic principles, as each new block added to the blockchain includes the “cryptographic hash” of its parent block.[6] This technology enables decentralized operation outside the traditional banking system.[7] This decentralized architecture thus directly challenges the intermediation function on which traditional banking relies.
The regulation of cryptocurrencies and digital assets in the United States has been marked by disjointed, uncoordinated developments,[8] which is why the current debates surrounding the CLARITY Act are of utmost importance to both the crypto and banking industries.
- The CLARITY Act’s Proposed Allocation of Regulatory Authority
The Digital Asset Market Clarity Act (“CLARITY Act”) was passed by the House of Representatives on July 17, 2025.[9] It now needs to go through the Senate’s legislative process. This bill aims to resolve long-standing friction between the SEC and the CFTC regarding the boundaries of their jurisdiction over crypto assets.[10] The CFTC has taken the position that virtual currencies are commodities under the Commodity Exchange Act.[11] While its regulatory oversight over commodity cash markets is limited, the CFTC retains general anti-fraud and manipulation enforcement authority over virtual currency cash markets as commodities in interstate commerce.[12] In contrast, former Chair Gary Gensler led the SEC to take a more proactive stance, under which most digital assets were deemed securities under the Supreme Court’s 1946 Howey test for investment contracts.[13]
The House text now assigns the CFTC primary authority over digital commodities and their spot intermediaries, requiring registration of digital commodity exchanges, brokers, and dealers and granting the Commission exclusive jurisdiction over registered entities for activities subject to the Act.[14] The SEC retains authority over securities,[15] and the text expressly preserves SEC supervisory authority in contexts such as qualified digital asset custodians and institutionalizes SEC engagement through FinHub and joint interagency studies.[16] The House version thus extends the Commodity Exchange Act framework to spot digital commodity intermediaries, thereby expanding the CFTC’s regulatory footprint, while maintaining the SEC’s full authority over digital asset securities under the federal securities laws.[17]
- The Senate Stalemate as the Political Manifestation of Competing Visions of Financial Intermediation
To understand why Coinbase CEO Brian Armstrong withdrew his support for the bill as it was reviewed by the Senate Banking Committee, it is relevant to note how the CLARITY Act relates to the GENIUS Act. The GENIUS Act was passed by Congress on July 18, 2025.[18] It created “licensing and regulatory requirements for domestic payment stablecoin issuers and […] provide[d] requirements for the custody and safekeeping of certain payment stablecoin-related assets.”[19] A stablecoin is a cryptocurrency whose value is designed to be stable, “typically by being pegged to a fiat currency like the U.S. dollar.”[20] Moreover, the GENIUS Act strictly prohibits stablecoin issuers from paying interest or yield to stablecoin holders, thereby preventing them from competing with banks through a practice similar to traditional interest-bearing bank deposits.[21]
The issue is that this prohibition applies only to stablecoin issuers.[22] Thus, arrangements between stablecoin issuers and platforms like Coinbase have effectively circumvented this legislative prohibition in practice.[23] This is why, in the context of the adoption of the CLARITY Act, banks call on Congress to fix this “loophole” created by the GENIUS Act.[24]
Beyond stablecoins themselves, the current Senate stalemate reflects a deeper divide between two antagonistic industries. The banks, as heavily regulated institutions, are confronted with the rise of a decentralized alternative offering digital assets that are increasingly similar to what they offer.[25] The way these crypto assets are regulated is thus crucial to both of these industries, with banks pushing for a heavier regulatory burden on the crypto industry while platforms like Coinbase advocate for a more lenient and flexible approach that, beyond mere convenience, lies at the core of what blockchain technology sought to achieve in the first place: a system designed to function beyond the traditional structures of financial intermediation.
[1] Brian Armstrong (@brian_armstrong), X (Jan. 14, 2026, 4:05 PM), https://x.com/brian_armstrong/status/2011545247105355865?s=20
[2] Hannah Lang & Carlos Méndez, U.S. Senate Committee Delays Crypto Bill After Opposition from Coinbase CEO, Reuters (Jan. 15, 2026, 3:47 PM EST), https://www.reuters.com/sustainability/boards-policy-regulation/coinbase-cannot-support-crypto-bill-current-form-ceo-armstrong-says-2026-01-15/
[3] Id.
[4] Deepak Kumar Sharma, Shrid Pant, Mehul Sharma & Shikha Brahmachari, Cryptocurrency Mechanisms for Blockchains: Models, Characteristics, Challenges, and Applications, in Handbook of Research on Blockchain Technology 323–348 (Academic Press 2020).
[5] Mohammad Hashemi Joo, Yuka Nishikawa & Krishnan Dandapani, Cryptocurrency, a Successful Application of Blockchain Technology, 46 Managerial Fin. 715, 715 (2020).
[6] Luke Tredinnick, Cryptocurrencies and the Blockchain, 36 Bus. Info. Rev. 39–44 (2019).
[7] Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System 1 (2008) (describing a system that allows payments “without going through a financial institution”).
[8] Aaron Poynton, U.S. Cryptocurrency Regulation: A Slowly Evolving State of Affairs, 4 Notre Dame J. on Emerging Tech. 93, 101 (2023).
[9] Digital Asset Market Clarity Act of 2025, H.R. 3633, 119th Cong. (2025).
[10] Adrien K. Anderson et al., Clarifying the CLARITY Act: What To Know About the House Crypto Market Structure Bill and Its Path to Law(Aug. 26, 2025), https://www.arnoldporter.com/en/perspectives/advisories/2025/08/clarifying-the-clarity-act
[11] Commodity Futures Trading Comm’n, The CFTC’s Role in Monitoring Virtual Currencies 2 (2020).
[12] Id.
[13] Anderson et al., Clarifying the CLARITY Act.
[14] H.R. 3633, 119th Cong. § 406(a) (registration requirement for digital commodity brokers and dealers); id. § 404 (core principles and regulation of digital commodity exchanges); id. § 406(k) (exclusive jurisdiction over registered digital commodity brokers and dealers); id. § 404(k) (exclusive jurisdiction over registered digital commodity exchanges); id. § 407 (registration of associated persons).
[15] U.S. Senate Comm. on Banking, Hous., & Urb. Affs., Myth vs. Fact: The CLARITY Act (Jan. 13, 2026),https://www.banking.senate.gov/newsroom/majority/myth-vs-fact-the-clarity-act (stating that “securities remain securities” and that “the SEC retains full enforcement authority over digital asset securities”).
[16] H.R. 3633, 119th Cong. § 405(b)(1) (qualified digital asset custodians subject to supervision by, inter alia, the SEC); id. § 502 (Strategic Hub for Innovation and Financial Technology (FinHub)); id. § 504 (joint CFTC–SEC study on decentralized finance); id. § 507 (joint CFTC–SEC study on financial market infrastructure improvements).
[17] Policy Backgrounder: The Outlook for Digital Assets in 2026, Conference Board (Feb. 5, 2026) (noting that the CLARITY Act “would give the Commodity Futures Trading Commission (CFTC) jurisdiction over most types of digital assets,” while the SEC is also “exploring significant regulatory changes”), https://www.conference-board.org/research/ced-policy-backgrounders/the-outlook-for-digital-assets-in-2026
[18] Guiding and Establishing National Innovation for U.S. Stablecoins Act, Pub. L. No. 119-27, 139 Stat. 419 (2025).
[19] Chuck Daly, Joel D. Feinberg, Kristin S. Teager, David E. Teitelbaum, Lilya Tessler, Thomas G. Ward, Jay G. Baris & Kristen E. Kane, The GENIUS Act: A Framework for U.S. Stablecoin Issuance, Banking L.J., Nov.–Dec. 2025.
[20] Jack Manley, What Is a Stablecoin?, J.P. Morgan Asset Mgmt. (July 9, 2025), https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/on-the-minds-of-investors/what-is-a-stablecoin/
[21] David Krause, The GENIUS Act’s “Interest” Prohibition: Evidence of Regulatory Arbitrage in Digital Asset Markets (Jan. 15, 2026), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6081468
[22] Latham & Watkins LLP, The GENIUS Act of 2025: Stablecoin Legislation Adopted in the United States (July 24, 2025), https://www.lw.com/en/insights/the-genius-act-of-2025-stablecoin-legislation-adopted-in-the-us (“The GENIUS Act prohibits stablecoin issuers from offering any form of interest or yield to stablecoin holders, but does not explicitly prohibit affiliate or third-party arrangements that might offer interest-bearing products.”).
[23] Bank Policy Inst., The Risks from Allowing Stablecoins to Pay Interest 6 (Sept. 25, 2025) (explaining that restrictions on stablecoin issuers can be “easily evaded” through indirect payment structures).
[24] See Letter from Am. Bankers Ass’n et al. to Members of the U.S. Senate (Feb. 4, 2026) (urging Congress to “clos[e] the payment of interest loophole” and to “apply that same […] prohibition to […] crypto exchanges and other market players,” warning that stablecoin rewards would “siphon trillions from local lending”).
[25] Jessie Jiaxu Wang, Banks in the Age of Stablecoins: Some Possible Implications for Deposits, Credit, and Financial Intermediation, FEDS Notes (Bd. of Governors of the Fed. Rsrv. Sys., Dec. 17, 2025), https://doi.org/10.17016/2380-7172.3970 (“Domestic substitution of bank deposits into stablecoins may directly reduce U.S. bank deposits.”).