On January 14, a bill aimed at establishing regulations for the U.S. crypto market — the CLARITY Act — is set to face a crucial vote in the Senate Banking Committee. On the eve of this industry milestone, Coinbase's co-founder and CEO Brian Armstrong announced that the company would fully withdraw its support for the bill, stating that "a bad bill is worse than no bill."

The announcement immediately sent shockwaves through the industry. However, what was truly surprising was Coinbase finding itself almost alone in opposition, with nearly all other major players in the industry standing on the opposite side.

Chris Dixon, a partner at the venture capital giant a16z, believed that "now is the time to push forward"; Brad Garlinghouse, CEO of the payment giant Ripple, stated that "clarity is better than chaos"; Arjun Sethi, co-CEO of the rival exchange Kraken, bluntly said, "This is a test of political resolve"; even the non-profit organization Coin Center, known for advocating decentralization, stated that the bill is "generally right on developer protections."

On one side stood the industry's undisputed leader, while on the other side was once a key ally of that leader. This was no longer the typical narrative of the crypto industry against Washington regulators but an internal industry war.

Isolated Coinbase

Why was Coinbase isolated by others?

The answer is simple: because almost all other major stakeholders, based on their own business interests and survival philosophies, judged that this imperfect bill was the best choice for the present.

First, a16z. As Silicon Valley's most renowned crypto investment firm, a16z's portfolio spans nearly all crypto verticals. For them, the most lethal aspect is not the severity of any specific provision but the ongoing regulatory uncertainty.

A clear legal framework, even with flaws, can provide a nurturing environment for the entire ecosystem they invest in. Chris Dixon's stance represents the consensus among investors; in their eyes, regulatory certainty trumps a perfect bill.

Next is the exchange Kraken. As one of Coinbase's direct competitors, Kraken is actively preparing for an IPO.

A regulatory endorsement from Congress will significantly boost its valuation in the open market. In contrast, the restriction on stablecoin yields in the bill has a much smaller financial impact on Kraken compared to Coinbase. Trading a manageable short-term business loss for a significant long-term listing benefit is a no-brainer for Kraken.

Looking at the payment giant Ripple. Its CEO Brad Garlinghouse summarized the stance in just six words: "Clarity beats chaos." Behind this is Ripple's multi-year, multimillion-dollar legal battle with the SEC.

For a company worn out by regulation, any form of peace is a victory. While the bill may not be perfect, it is far better than endless courtroom battles.

Lastly, we have the advocacy group Coin Center. As a nonprofit organization, their stance is least driven by commercial interests. Over the years, their core demand has been to ensure that software developers are not mistakenly classified as "money transmitters" and subjected to overregulation.

This bill wholly incorporates their advocated "Blockchain Regulatory Certainty Act (BRCA)," legally protecting developers. With the core goal achieved, other details can be compromised. Their support represents recognition from industry purists.

When venture capital, exchanges, payment companies, and advocacy groups all stand on the same side, Coinbase's position stands out glaringly.

So, the question arises, if the entire industry sees the path forward, what is it that Coinbase sees that it is willing to cause industry division to stop?

Business Model Determines Stance

The answer lies in Coinbase's financial statements, a $14 billion vulnerability.

To understand Armstrong's table-flipping behavior, one must first understand Coinbase's existential anxiety. For a long time, a significant portion of Coinbase's revenue has relied on cryptocurrency transaction fees.

This model's vulnerability was laid bare during the crypto winter, with windfall gains in bull markets and sharp revenue declines or even quarterly losses in bear markets. The company needed to find new and more stable sources of revenue.

Stablecoin yields are the second growth curve that Coinbase has identified.

Its business model is not complicated; users hold the USDC stablecoin pegged 1:1 to the US dollar on the Coinbase platform, and Coinbase lends out these deposited funds through DeFi protocols (such as Morpho), earns interest, and then rewards users with a portion of the gains. According to Coinbase's website, regular users can earn a 3.5% annualized return, while premium members can earn up to 4.5%.

According to Coinbase's third-quarter 2025 financial report, its "Interest and Financing Income" amounted to a staggering $355 million, with the vast majority coming from the stablecoin business. Based on this calculation, this business contributed approximately $1.4 billion in revenue to Coinbase in 2025, representing an increasingly significant portion of its total revenue. In a bear market with sluggish trading volume, this stable and substantial cash flow is Coinbase's lifeline.

However, a newly added provision in the CLARITY Act precisely targets Coinbase's vulnerability. This provision stipulates that stablecoin issuers or affiliates may not pay interest to users' "Static Holdings" but are allowed to pay interest for "Activities and Transactions."

This means that the practice of users simply holding USDC in their Coinbase accounts to earn interest will be prohibited. This is a severe blow to Coinbase, and if the bill is passed, this $1.4 billion revenue stream could significantly shrink or even drop to zero.

Furthermore, the various issues listed by Armstrong on social media seem more like a market structure-level struggle: the draft bill indirectly blocks the path of tokenized stocks/securities, sets a higher threshold for DeFi to overcome, makes regulatory access to user financial data easier, and weakens the CFTC's role in the spot market.

The ban on stablecoin interest is the most direct and immediately impactful cut to Coinbase among these impacts.

Different interests lead to different choices.

Kraken's stablecoin business is much smaller than Coinbase's, allowing it to trade short-term loss for the long-term value of an IPO; Ripple's core focus is on payments, with regulatory clarity valued above all else; a16z's chessboard is the entire ecosystem, where the gains and losses of individual projects do not affect the big picture. While Coinbase sees a cliff, other companies see a bridge.

Nevertheless, there is a third player in this game: the traditional banking sector.

The American Bankers Association (ABA) and the Bank Policy Institute (BPI) believe that allowing stablecoin yield payments will result in the outflow of trillions of dollars in deposits from the traditional banking system, posing a survival threat to thousands of community banks.

As early as July 2025, the Stablecoin Genius Act was passed, explicitly allowing stablecoins' "third-party and related-party" yield payments, providing a legal loophole for Coinbase's model. However, in the following 7 months, the banking industry launched a strong lobbying offensive, ultimately succeeding in adding a "static holding" ban in the CLARITY Act.

Banks are not afraid of the 3.5% yield, but of losing the right to price deposits. When users can freely choose to deposit funds in a bank or a crypto platform, the bank's decades-long low-interest rate monopoly comes to an end, which is the essence of the conflict.

So, in the face of such a complex game of interests, why did only Armstrong choose the most resolute path?

Two Philosophies of Survival

This is not just a conflict of business interests but a collision of two radically different philosophies of survival. One is Silicon Valley-style idealism and non-negotiation, while the other is Washington-style pragmatism and incremental reform.

Brian Armstrong represents the former. This is not his first public confrontation with regulators. Back in 2023, when the SEC sued Coinbase for operating an unregistered securities exchange, Armstrong publicly criticized the SEC's "inconsistent position" and revealed that Coinbase had held more than 30 meetings with regulatory agencies, repeatedly requesting clear rules but never receiving a response.

His position has been consistent: supporting regulation but staunchly opposing "bad regulation." In his view, accepting a fundamentally flawed bill is more dangerous than having no bill for the time being. Once a law is enacted, it will be extremely difficult to amend it in the future. Accepting a bill that strangles the core business model for short-term certainty is akin to drinking poison to quench thirst.

Armstrong's logic is to fight at all costs now, even though it is painful, to preserve the possibility of fighting for better rules in the future. Compromising now is equivalent to permanently giving up the stablecoin yield battleground. In this war crucial to the company's future, compromise is surrender.

On the other hand, other leaders in the crypto industry have shown a completely different philosophy of pragmatism. They understand Washington's rules of the game—legislation is the art of compromise, and perfection is the enemy of excellence.

Kraken's CEO, Jesse, believes that the key is to first establish a legal framework that gives the industry a legitimate social status, and then gradually improve it through continuous lobbying and engagement in practice. Survival first, then development.

Ripple's CEO Brad Garlinghouse has always prioritized certainty above all else. Years of litigation have taught him that struggling in the quagmire of the law is a huge drain on the company. An imperfect peace is far better than a perfect war.

a16z's Dixon, on the other hand, looks at things from a strategic, global-competition standpoint. He believes that if the United States delays legislation due to internal squabbles, it will only cede its position as the global financial innovation hub to Singapore, Dubai, or Hong Kong.

Armstrong is still fighting Washington Silicon Valley-style, while others have already learned Washington's language.

One adheres to the principle of "prefer to be shattered jade than unbroken pottery," while the other considers the reality of "as long as the green hills remain, there is no need to worry about firewood." Which one is wiser? Before time gives us an answer, no one can say for sure. But what is certain is that both choices come with a heavy cost.

The Cost of Civil War

What is the real cost of this civil war sparked by Coinbase?

Firstly, it has caused a political rift in the crypto industry.

According to Politico, Senate Banking Committee Chairman Tim Scott delayed the vote decision, partly due to Coinbase's last-minute change of stance and the uncertain support for the bill among bipartisan lawmakers. While Coinbase's move was not the sole reason, it was undoubtedly a key factor that threw the whole effort into chaos.

If the bill ultimately fails because of this, other companies may perhaps blame Coinbase to some extent, believing that it prioritized its own interests and disrupted the industry's progress.

More severely, this open internal conflict has greatly weakened the crypto industry's collective bargaining power in Washington.

When lawmakers see that the industry cannot present a unified front, they will feel confused and frustrated. A divided industry will crumble in the face of powerful traditional financial lobbying groups.

Secondly, it has exposed the dilemma of digital-age regulation.

The CLARITY Act attempts to walk a tightrope between encouraging innovation and guarding against risks, but this balancing act is unlikely to satisfy everyone. For Coinbase, the bill is too restrictive; for traditional banks, it's too lenient; for other crypto companies, it might just be right.

The dilemma of regulation lies in trying to set boundaries for insatiable desires. Every time a rule is established, it just marks the beginning of the next round of the game.

But the most significant cost has been the shaking of the foundation of the crypto industry.

What is the crypto industry, really? Is it a social experiment about decentralization and individual freedom, or is it a business about asset appreciation and wealth creation? Is it a revolution against the existing financial system, or is it a supplement and improvement to it?

Armstrong's resolve, juxtaposed with the compromises of others in the industry, collectively outline the current reality of this industry: a contradictory entity constantly oscillating between idealism and reality, revolution and business.

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