CLARITY Act: Coinbase’s U-Turn & Your Crypto Future

Authored by: Changan, Teddy, Amelia, Denise I Biteye Content Team

---

As 2026 dawned, after five tumultuous years marked by regulatory battles and hundreds of enforcement actions, the global cryptocurrency market’s gaze fixated on Capitol Hill in Washington. The CLARITY Act, initially conceived to bring much-needed definition to digital assets long adrift in a regulatory gray area, ultimately transformed into a high-stakes showdown between the old guard of finance and the burgeoning new order.

Today, we delve into the hundreds of pages of this pivotal legislation, not to dissect legal jargon, but to uncover: What compelled Coinbase, once a vocal proponent of regulation, to execute a dramatic “about-face” at the eleventh hour? And for the everyday retail investor, how will this extensive document fundamentally reshape your financial future?

CLARITY’s Genesis: Ending the Wild West of Crypto

Prior to the CLARITY Act, the landscape of US crypto regulation resembled a legal wilderness, where industry titans navigated a chaotic environment:

• The Inter-Agency Turf War: Before CLARITY, the United States lacked a cohesive regulatory framework for digital assets. The Securities and Exchange Commission (SEC) asserted jurisdiction over tokens as securities, while the Commodity Futures Trading Commission (CFTC) sought to classify them as commodities. Project developers found themselves caught in the crossfire, never knowing which regulator would next come knocking.
• The Shadow of “Regulation by Enforcement”: In the absence of clear statutory guidance, the SEC adopted an aggressive strategy: “sue first, define later.” Companies like Ripple and Coinbase bore the brunt of this approach. The Ripple lawsuit, for instance, dragged on for over three years, directly impacting billions in XRP market capitalization and casting a long shadow of uncertainty over the entire industry. This climate directly contributed to a significant exodus of talent and capital to more crypto-friendly jurisdictions like Singapore and Europe.
• Traditional Banking’s Mounting Anxiety: Stablecoins, offering average annual yields of 4.2%, significantly outpaced traditional bank savings rates. This disparity fueled fears of over $20 billion in potential monthly deposit outflows from conventional banks. Determined to safeguard their market share, powerful banking lobbies urgently pushed for legislation to bring cryptocurrencies under strict legal control.

To quell this regulatory disarray, the multi-hundred-page CLARITY Act sought to redefine market rules through key provisions:

1) Defining Regulatory Authority: Assets deemed sufficiently decentralized and no longer reliant on a single issuer (e.g., Bitcoin) would fall under CFTC oversight. Early-stage assets exhibiting clear fundraising characteristics would be regulated by the SEC.

2) Harmonizing Stablecoin Frameworks: “Permitted Payment Stablecoins” meeting the criteria of the GENIUS Act would be explicitly excluded from securities definitions. Their trading and usage would be supervised by the CFTC/SEC, with issuance and reserve requirements aligned with the GENIUS Act.

This promised end to inter-agency squabbling and the prospect of a “predictable future” initially garnered public support for CLARITY from major players like Coinbase, Ripple, and Kraken.

That is, until the Senate introduced its version.

Coinbase’s Pivotal Turn: The Senate’s Stricter Stance

The original CLARITY Act aimed for clarity, built on pillars of asset classification, financing oversight, and stablecoin access. However, the Senate’s revised draft in January 2026 marked a dramatic shift, introducing profoundly stringent terms:

1. Tokenization Blockade: The Senate version included clauses that effectively restricted the direct tokenization of traditional financial assets (such as US stocks and bonds) for trading on public blockchains.
2. RWA Exclusion: Real World Assets (RWA) were explicitly excluded from the definition of digital commodities. This meant they would be subjected to exceptionally rigid and inflexible securities law regulation, potentially even preventing their listing on centralized exchanges (CEXs).

These amendments ignited a firestorm of industry debate. Brian Armstrong, CEO of Coinbase, publicly rescinded his support, declaring the revised bill “worse than no bill at all.” His core objections centered on three critical areas:

1. The Demise of Stablecoin Rewards (A Direct Blow to Profits)

Coinbase, in partnership with Circle, offers users holding USDC an approximate 3.5% reward, a substantial revenue stream for the exchange. Banking lobbies aggressively pushed for this restriction, fearing a mass exodus of deposits from traditional banks to interest-bearing stablecoins.

2. A Ban on US Stock Tokenization and RWA Innovation

Coinbase has consistently championed tokenization as the future of finance. The new bill, through convoluted registration requirements, effectively prohibited the free trading of tokenized stocks on crypto infrastructure.

3. The “Doomsday Scenario” for DeFi

The legislation mandated that nearly all DeFi protocols register as banks or brokers, granting the government extensive authority to access DeFi transaction data. Brian Armstrong argued this was an egregious violation of user privacy and technically unfeasible for decentralized systems.

Navigating the New Landscape: Impacts on Market Participants

The same CLARITY Act, a single piece of legislation, presents starkly different realities for various market stakeholders.

1. Retail Investors: A Double-Edged Sword

• The Upside: Enhanced Protection: The bill mandates that centralized exchanges (CEXs) segregate customer funds, requiring third-party custodianship. This crucial provision fundamentally aims to prevent catastrophic events akin to the FTX collapse.
• The Downside: Lost Opportunities: Driven by the 2026 amendment’s protections for traditional banks, retail investors may forfeit the 3%-5% interest previously earned on stablecoin holdings on CEXs. Furthermore, with RWA limitations, the promising vision of ordinary individuals purchasing fractional shares (e.g., 0.01 shares of Tesla) on-chain could evaporate. The precise impact, of course, hinges on the jurisdiction of specific assets and CEXs under the bill’s purview.

2. Institutions: The Compliance Gateway

For institutional players, the CLARITY Act represents a long-awaited “compliance ticket.” Legal certainty is the indispensable precondition for financial behemoths like Goldman Sachs and BlackRock to fully enter the digital asset space.

Once the jurisdictional lines between the SEC and CFTC are unequivocally drawn, tens of billions of dollars in institutional capital are poised for compliant allocation into digital commodities beyond just Bitcoin and Ethereum. This clarity is also expected to trigger a significant wave of altcoin spot ETF applications.

3. Project Teams: A Mixed Bag of Fortunes

Project teams whose assets are successfully defined as “digital commodities” will find themselves liberated from the SEC’s persistent scrutiny. Conversely, those classified as “securities” will face an onerous burden of compliance reporting and severe financing restrictions.

Additionally, the bill mandates token lock-up periods for core development teams, a crucial measure designed to curb the notorious practice of immediate post-launch token dumping.

Crucially, the bill explicitly protects non-custodial developers. If your role involves merely writing code and publishing open-source protocols without handling customer funds, you will not be classified as a “Money Transmitter.” This safeguards pure technological innovation at the protocol layer.

Industry Divided: A Spectrum of Reactions

Biteye has compiled insights from leading industry key opinion leaders (KOLs) and project founders regarding their stances on the latest revised bill:

AB Kuai.Dong @_FORAB (XHunt Rank: 1087)

Tweet Link: https://x.com/_FORAB/status/2011710073933095037

Perspective: Highlights Coinbase’s sudden reversal, arguing that the bill’s latest iteration favors traditional banks at the expense of crypto-native companies. Specific objections include restricting stablecoin rewards, increasing the cost of stock tokenization, and expanding government oversight into DeFi, which could stifle innovation.

qinbafrank @qinbafrank (XHunt Rank: 1533)

Tweet Link: https://x.com/qinbafrank/status/2011631328555647098

Perspective: Notes the Senate Banking Committee’s cancellation of deliberations due to Coinbase’s opposition, potentially triggering a crypto market downturn. Key concerns revolve around a “de facto ban” on tokenized equity, DeFi privacy infringements, weakening of CFTC powers, and the abolition of stablecoin reward mechanisms, believing these measures empower the SEC and suppress innovation.

Phyrex @Phyrex_Ni (XHunt Rank: 765)

Tweet Link: https://x.com/Phyrex_Ni/status/2011810871211925967

Perspective: Analyzes the motivations behind the Coinbase CEO’s resistance, citing restrictions on tokenized stocks, functional regulation of DeFi, unresolved SEC jurisdictional issues, the prohibition of interest-bearing stablecoins, and even ethical conflicts of interest linked to the Trump family.

PANews@PANews (XHunt Rank: 1827)

Tweet Link: https://x.com/PANews/status/2011013801802686752

Perspective: Argues that delaying the bill’s progress is increasingly detrimental. January represents one of the Senate’s few available legislative windows; failure to advance now could lead to it being “naturally squeezed out” by other legislative priorities. Furthermore, a Democratic majority in mid-term elections would likely reduce its chances of passage.

Jason Chen @jason_chen998 (XHunt Rank: 1082)

Tweet Link: https://x.com/jason_chen998/status/2012358494901694931

Perspective: Contends that the conflict is fundamentally driven by vested interests. For example, Coinbase’s opposition stems from the potential loss of $1 billion in annual revenue and significant user outflow if stablecoin interest is prohibited. Conversely, Ripple’s CEO strongly supports the CLARITY Act because the stablecoin interest ban has minimal impact on their operations.

Bitcoin Orange @chengzi_95330 (XHunt Rank: 3508)

Tweet Link: https://x.com/chengzi_95330/status/2012136666912494037

Perspective: Points out that despite the bill’s imperfections, entities like a16z, Circle, and Kraken advocate for its continued progression, fearing that “flipping the table” now could permanently close the legislative window. Coinbase, however, believes that if core issues like stablecoin yields cannot be addressed in a crypto-friendly political climate, they certainly won’t be in a future, potentially more anti-crypto environment.

Brad Garlinghouse (Ripple CEO) @bgarlinghouse (XHunt Rank: 1870)

Tweet Link: https://x.com/bgarlinghouse/status/2011559973818343785

Perspective: Expressed surprise at Coinbase’s strong opposition. While acknowledging Brian Armstrong’s concerns as valid, Garlinghouse emphasized that “the rest of the industry is still constructively supporting and working to resolve issues.” He affirmed Ripple’s readiness to advance under a compliant framework (e.g., XRPL tokenization), viewing the bill as a step forward and unwilling to abandon the overall process due to disagreements.

Vlad Tenev (Robinhood CEO)@vladtenev (XHunt Rank: 380)

Tweet Link: https://x.com/vladtenev/status/2011622052457783432

Perspective: Supports the bill’s progression. He reiterated Robinhood’s commitment to Congress passing a market structure bill, acknowledging ongoing work (such as addressing staking restrictions in certain states and stock tokenization availability). Tenev sees a clear path forward and offers assistance to the Senate Banking Committee, stressing the need for US leadership in crypto policy to unlock innovation and protect consumers.

Arjun Sethi (Kraken co-CEO)@arjunsethi (XHunt Rank: 1941)

Tweet Link: https://x.com/arjunsethi/status/2011579807272759639

Perspective: Offers strong support. Sethi affirmed Kraken’s full commitment to supporting the efforts of Senators Tim Scott and Cynthia Lummis. He criticized the ease of “walking away or declaring failure,” emphasizing the importance of “continuing to show up, solve problems, and build consensus.” He warned that abandoning the bill would only exacerbate uncertainty and drive innovation overseas.

Retail Investor Playbook: Navigating 2026 for Growth and Protection

The CLARITY Act saga is more than just a legislative battle; it represents a “coming-of-age” moment for the crypto industry, marking its definitive transition from the fringes to the global financial main stage.

Regulatory “clarity” itself serves as a foundational infrastructure. For retail investors, understanding and adapting to these new rules will be paramount for safeguarding and growing assets in the years ahead. Here are three practical, actionable strategies:

1. Re-evaluate Your Portfolio: Prioritize “Digital Commodity” Assets

Consider increasing your allocation to assets explicitly classified as “digital commodities” (e.g., Bitcoin, Ethereum, and established blue-chip tokens within their ecosystems). These assets are poised to be the primary beneficiaries of substantial, compliant institutional capital inflows as regulatory uncertainty dissipates. Their spot ETF products are also more likely to receive approval, providing robust price support. Conversely, exercise extreme caution with newly issued tokens that are likely to be categorized as “securities,” as they will face stringent disclosure and financing restrictions, potentially leading to liquidity issues.

2. Reconfigure Stablecoin Strategy: Explore Alternative Yield Solutions

If you reside in a region governed by the CLARITY Act (e.g., the United States) and the bill’s implementation leads to compliant exchanges (like Coinbase, Circle) ceasing to offer 3%-5% stablecoin rewards, consider migrating funds to non-custodial on-chain DeFi protocols. While the bill does enhance oversight of DeFi, protocols designed with censorship resistance may offer a safe harbor for native yields.

3. Approach RWA with Caution: Beware of Liquidity Traps

Given the Senate’s revised version’s extremely stringent stance on Real World Assets (RWA), which could even prohibit their listing on CEXs, if you currently hold significant amounts of tokenized US stocks or bonds, be vigilant about the risk of liquidity drying up. Furthermore, until the bill’s final form is clear, avoid blindly engaging in tokenized traditional financial products that demand high compliance and extensive Know Your Customer (KYC) procedures, as these products are most susceptible to forced shutdowns due to policy shifts.

---

(The above content is an authorized excerpt and reprint from our partner PANews, original link | Source: Biteye)