Washington’s long-running efforts to bring regulatory clarity to the US crypto market have entered a more uncertain phase. The Digital Asset Market Clarity Act, known as the CLARITY Act, was expected to move closer to a vote in the Senate this week.
Instead, a sudden withdrawal of support from Coinbase and a last-minute pause by Senate leadership have exposed deep divisions within the industry and among lawmakers. While the White House insists the bill is still on track, the debate over how digital assets should be regulated is becoming increasingly fragmented.
BTC's price records some gains on the daily chart. Source: BTCUSD on Tradingview
Coinbase withdrawal leads to legislative pause
The immediate turning point then came CEO of Coinbase Brian Armstrong announced that the company could no longer support the current draft of the CLARITY Act.
Armstrong argued that the bill would be worse than existing regulatory uncertainty, citing concerns about restrictions on tokenized stocks, limits on crypto rewards and expanded government access to financial data.
Shortly thereafter, Senate Banking Committee Chairman Tim Scott introduced a brief pause in the bill’s progress, canceling a planned increase.
Scott described the delay as procedural and not political, stating that negotiations were ongoing and bipartisan talks continued. A new markup date has been set for January 27, once the updated bill language is released.
Despite the setback, White House AI and crypto czar David Sacks reiterated that the administration still supports the legislation. He said the pause should be used to resolve remaining issues and promote a framework that enables innovation while strengthening oversight.
Industry divided between SEC and CFTC roles
At the heart of the dispute is the division of regulatory powers between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), as set out in the CLARITY Act.
Crypto exchanges generally prefer the CFTC’s approach, which treats many digital assets as commodities. The SEC, on the other hand, enforces securities laws that impose stricter compliance requirements.
Critics argue that the bill shifts too much power to the SEC, particularly over tokenized stocks and certain crypto products. Coinbase has warned that the proposed rules could effectively block the development of on-chain stock trading and limit user rewards programs.
Other industry leaders, including executives from Ripple, a16z and Kraken, have taken a more cautious stance. While they acknowledge the flaws in the design, they argue that passing some form of market structure legislation is better than leaving the sector in regulatory limbo.
Banks, stablecoins and the broader stakes
Another controversial topic is the regulation of stablecoins. The CLARITY Act would make it difficult for crypto platforms to offer returns or interest-like rewards on holding stablecoins. Banks support these restrictions, saying they protect financial stability.
Lawmakers also point to past failures, such as the FTX collapse, as evidence that clearer rules are needed to protect consumers and national security. But behind the scenes, frustration is growing.
Senate sources indicate that some committee members were unhappy with Coinbase’s timing and viewed the withdrawal as disruptive to months of negotiations.
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