Coinbase Withdraws Support for US Market Structure Bill Citing Regulatory Overreach
In a significant blow to bipartisan efforts in Washington, Coinbase officially withdrew its support for the Senate’s cryptocurrency market structure bill, known as the CLARITY Act, on January 14, 2026. CEO Brian Armstrong announced the reversal just hours before a scheduled committee markup, stating that the current version of the legislation is “materially worse” than the status quo. The platform’s primary grievance centers on a series of last-minute amendments that would effectively ban tokenized equities and impose stringent restrictions on decentralized finance (DeFi) protocols. Armstrong argued that the bill, as written, would stifle American innovation and provide the government with “unlimited access” to private financial records through overly broad disclosure requirements.
The Battle Over Stablecoin Rewards and the Influence of the Banking Lobby
A central point of contention for Coinbase is the bill’s treatment of “stablecoin rewards,” a revenue stream that the platform projected would reach $1.3 billion in 2025. While the previous GENIUS Act prohibited issuers from paying direct interest, it did not explicitly bar third-party platforms from offering rewards to their users. The new market structure draft, however, reportedly includes language backed by the banking industry that would restrict the ability to offer these incentives to licensed banking entities alone. Coinbase and other crypto-native firms argue that this “protectionist” measure is designed to shield traditional banks from competition rather than protect consumers. By potentially killing the rewards model for non-banks, the bill threatens to undermine the dominance of dollar-backed stablecoins at a time when global rivals are aggressively launching interest-bearing digital currencies.
Strained Bipartisanship and the Future of Federal Crypto Oversight
The withdrawal of support from the largest U.S. crypto platform has essentially fractured the fragile bipartisan coalition that had spent months drafting the CLARITY Act. Critics of the bill’s current form point to the “erosion of the CFTC’s authority” and a shift in power toward the SEC as further evidence of a regulatory framework that is increasingly hostile to the industry’s core principles. While some advocacy groups remain committed to passing a bill in 2026, the absence of Coinbase’s backing makes it increasingly likely that the legislation will face further delays or a complete failure to advance before the midterm elections. As the Senate Banking Committee evaluates its next steps, the industry remains at a crossroads, caught between the desire for clear federal rules and the fear of a legal framework that prioritizes legacy banking interests over decentralized innovation.
