US Crypto Legislation in Limbo: CLARITY Act Stalls Amidst Stablecoin Standoff

Following last week’s dramatic withdrawal of support by Coinbase, which subsequently delayed the deliberation of the Digital Asset Market Clarity Act (CLARITY Act), new reports indicate that the Senate Banking Committee is anticipated to require several more weeks before it can resume deliberation on the bill.

The Legislative Gridlock: A Battle of Interests

While the legislative gridlock was initially ignited by Coinbase’s decision to retract its backing, at its core lies an intractable conflict of interests between traditional financial institutions and the burgeoning crypto industry. According to sources cited by CoinDesk, Republican members of the Banking Committee and the White House have made their stance unequivocally clear: they expect the cryptocurrency industry, led by Coinbase, to forge a consensus with banking operators on the contentious “stablecoin yield clause” before legislative proceedings can recommence.

The “Stablecoin Yield Clause”: A Point of Contention

The “stablecoin yield clause” proposes to prohibit cryptocurrency firms from offering interest, rewards, or any other form of yield to stablecoin users. Wall Street banks argue that allowing crypto platforms to provide high interest or returns would pose an existential threat to traditional banks through deposit flight. Conversely, Coinbase contends that this provision would severely impact its platform revenues and significantly undermine its competitive edge in the market.

Shifting Priorities and Parallel Legislative Efforts

Adding another layer of complexity, Bloomberg reported on Wednesday that the Banking Committee is unlikely to reprioritize the CLARITY Act in the immediate future. The committee is now primarily focused on housing issues, influenced by recent strong calls from President Trump for institutional investors to exit the housing market to help reduce living costs.

Despite the Banking Committee’s standstill, the Senate Agriculture Committee, which oversees futures commodities, has forged ahead independently. On Wednesday, it released its own version of the CLARITY Act. However, this version is widely expected to be a highly partisan legislative draft, lacking sufficient Democratic support, which could severely hinder its passage through the Senate.

Even if the Agriculture Committee successfully advances its bill to a full Senate vote, without bipartisan support and a complementary bill from the Banking Committee, it faces a significant risk of legislative failure.

A White House Warning: Navigating the Political Landscape

Amidst the ongoing stalemate, Patrick Witt, Executive Director of the President’s Digital Asset Advisory Committee at the White House, issued a stark warning to crypto opponents of the bill on social media platform X. He emphasized that the passage of a cryptocurrency bill is “a matter of when, not if.” Witt cautioned that if the industry misses the current “GOP trifecta” — a period where Republicans control the White House, Senate, and House — any future version introduced under Democratic leadership would likely be even less favorable to the industry. He stated:

“You may not like every detail of the CLARITY Act, but I can guarantee you will absolutely hate the Democratic version even more. We should strive to refine this bill, recognize the reality of needing 60 votes in the Senate and making compromises, and not let the pursuit of perfection become the enemy of progress.”

Key Players and the Path Forward

As of January 2026, institutions publicly supporting the current version of the CLARITY Act include Andreessen Horowitz (a16z), Circle, Paradigm, Kraken, and Ripple. Conversely, those opposing or having withdrawn their support include Coinbase and the Blockchain Association.

Despite the continuous setbacks, observers familiar with Washington’s intricate workings are not entirely without hope. Sources analyze that if the Banking Committee can pass its version by the end of March (before the Easter recess) and the full Senate completes its vote before July 4th (Independence Day), the House of Representatives would still have ample time to finalize legislation in September or during the “lame-duck session” after this year’s midterm elections.