Why Can Coinbase Stall the CLARITY Act Vote with a Sentence?
Original Title: The Biggest U.S. Crypto Company Asserts Its Power in Washington
Original Author: David Yaffe-Bellany, The New York Times
Translation: Peggy, BlockBeats
Editor's Note: The "Clarity Act," which was about to enter a crucial vote, was urgently halted due to Coinbase CEO Brian Armstrong's public opposition. The controversy revolves around stablecoin interest rate restrictions and the SEC's regulatory boundaries. In fact, with the regulatory shift since Trump took office, the crypto industry has gradually shifted from being a "regulated entity" to a "rule negotiator." This intervention not only changed the voting process but also exposed the true interest game behind crypto legislation.
The following is the original text:
An upcoming cryptocurrency bill vote scheduled for Thursday was canceled after Coinbase CEO Brian Armstrong publicly opposed the bill on Wednesday evening. Image Source: The New York Times
After months of negotiations, a significant cryptocurrency bill was scheduled to enter the committee voting stage in the Senate on Thursday, a critical step in the legislative process.
However, the CEO of the largest U.S. crypto company, Coinbase, spoke out on social media. Coinbase CEO Brian Armstrong wrote on X on Wednesday evening, "Unfortunately, Coinbase cannot support the current version of the bill. This version would be significantly worse than the current regulatory status quo. We'd rather have no bill than a bad bill."
Hours later, the Senate vote was called off.
Typically, the fate of a contentious legislative vote often hinges on a few moderate key lawmakers amidst partisan tug-of-war. But this week's shift in this landmark crypto bill highlighted Coinbase's significant influence in Washington today—a position that has rapidly ascended during the Trump administration.
Over the past few months, congressional staff have been advancing the drafting of the "Clarity Act." This nearly 300-page bill aims to establish a regulatory framework for almost all key aspects of the crypto industry, with many rules shaped by industry participation and advocacy. However, at the eleventh hour, Armstrong voiced opposition to a proposed section of the bill, believing that the wording could put one of Coinbase's products at risk of being banned; he also stated that the bill would give too much power to the U.S.' top financial regulatory body, the Securities and Exchange Commission (SEC).
This time, Coinbase took decisive action, the result of the company's years of continued political influence operation in Washington. As a nearly $700 billion publicly traded company, Coinbase has funded a network of political action committees (PACs) that, in 2024, poured more than $130 million into influencing congressional elections with the aim of supporting more pro-crypto industry lawmakers.
This intense wave of political spending sent a clear message to Congress: anyone opposing the crypto industry could become a target.
Today, top industry companies have enough leverage to promote their interests. Todd Phillips, a finance expert at Georgia State University, said, "Coinbase made a very smart move here." A Coinbase spokesperson declined to comment on this.
Founded in 2012, Coinbase offers users a platform to buy, sell, and store cryptocurrencies like Bitcoin and Ethereum. Anyone can sign up on their app and make purchases with a few clicks.
However, not long ago, the company faced a more challenging environment in Washington. In 2023, the U.S. Securities and Exchange Commission (SEC) sued Coinbase, accusing it of operating as an "unregistered exchange," as part of the Biden administration's comprehensive crackdown on the crypto industry. Coinbase co-founder Armstrong criticized the SEC's "enforcement overreach" and called for clearer crypto regulatory rules.
With Trump winning the presidency in 2024, the situation changed drastically. Shortly before taking office, Trump and his sons launched a crypto venture, with Trump publicly stating his intention to make the U.S. the "global capital of crypto."
Within weeks of Trump's inauguration, the U.S. Securities and Exchange Commission (SEC) dropped the lawsuits against Coinbase and other crypto companies. Subsequently, the crypto industry pushed for legislation to enshrine this regulatory rollback into law to prevent future harsh government crackdowns on the industry.
The U.S. Securities and Exchange Commission (SEC) dropped the lawsuit against Coinbase shortly after President Trump took office last year. Image Source: The New York Times
In July this year, with government support, the House of Representatives passed its version of the "Clarity Act," largely adopting the crypto industry's envisioned new regulatory framework. This act will make it easier for companies like Coinbase to argue that digital assets are not securities, thus avoiding the federal securities regulation system aimed at protecting investors and markets.
However, the bill faced resistance in the Senate. Last fall, Senate Democrats proposed rules to strictly regulate Decentralized Finance (DeFi), a branch of the crypto industry, sparking strong industry backlash.
Meanwhile, banking industry lobbying groups pushed to include a provision in the bill to prohibit cryptocurrency exchanges like Coinbase from paying interest to stablecoin holders. Stablecoins are a type of digital currency designed to maintain a price of 1 US dollar. The banking industry believes that such "interest-bearing products" offered by cryptocurrency exchanges would undermine traditional banking business as they would compete with traditional deposit accounts.
This issue quickly became a key concern for Coinbase. Banning interest payments could potentially impact one of its revenue streams. Coinbase's Head of Global Public Policy, Kara Calvert, stated, "Competition is all about offering these kinds of incentive programs, and that is critical."
The latest version of the "Clarity Act" bill in the Senate was released close to midnight on Monday. Congressional staff and cryptocurrency industry executives immediately began reviewing the text, rushing to complete their readings before the Senate committee meeting scheduled for Thursday. This meeting, known as a "markup," would allow senators to propose amendments. As the markup approached, despite other cryptocurrency industry executives expressing support for the bill on social media, Armstrong announced his withdrawal of support.
On Wednesday evening, Senator Tim Scott, a Republican from South Carolina and the chairman of the Senate Banking Committee, announced that the markup would be postponed, with no specific time determined yet. In his statement, he said, "All parties continue to engage in good faith. Our goal is to establish clear 'rules of the road' that protect consumers, enhance national security, and ensure the future of finance is built in America."
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