Is the CLARITY Act Protecting Banks? Coinbase’s Exit Reignites Debate

Coinbase’s decision to withdraw support for the US CLARITY Act has reignited tensions across the crypto industry. The bill, originally positioned as a long-awaited framework to bring regulatory clarity to digital assets, is now at the center of a deeper debate around competition, power, and whose interests US crypto regulation truly serves. While Coinbase says its concerns are rooted in consumer protection, critics argue the move reflects growing unease over shifting market dynamics.

What the CLARITY Act Is Meant to Do

The CLARITY Act is designed to define how crypto assets should be regulated in the US, drawing clearer lines between agencies and setting rules for exchanges, issuers, and market participants. Supporters believe this would reduce legal uncertainty and help the industry move forward with confidence. However, progress has stalled after repeated delays to the Senate markup hearing, leaving the bill in a holding pattern just as industry scrutiny intensifies.

Coinbase’s reversal has shifted attention away from lawmakers and toward the exchange itself, raising questions about what changed behind the scenes.

Critics Question Coinbase’s Motives

Citron Research has openly challenged Coinbase’s narrative, suggesting the exchange’s concerns go beyond policy details. According to Citron, clearer market structure rules could benefit tokenized securities firms like Securitize, which have strong backing from traditional finance. With regulatory uncertainty reduced, these firms could scale quickly, creating real competition for established crypto exchanges.

From this perspective, Coinbase may support clarity in principle but resist versions of the bill that lower barriers for Wall Street-linked players. This has fueled speculation that the exchange is trying to protect its market position rather than block harmful regulation.

Stablecoins, Banks, and the Yield Debate

Adding another layer to the debate, analyst Shanaka Anslem Perera argues the CLARITY Act is fundamentally about protecting the traditional banking system. He claims the bill functions as a $6.6 trillion shield for bank deposits threatened by yield-bearing stablecoins.

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Perera highlights a key imbalance: banks typically pay depositors around 0.1% interest, while stablecoin issuers earn roughly 4.5% on Treasury bills. If that yield were passed to users, banks would struggle to compete. Citing Kansas City Federal Reserve research, he notes that competitive stablecoin yields could drain nearly 26% of bank deposits and erase about $1.5 trillion in lending capacity.

Section 404 and Regulatory Capture Claims

At the center of the controversy is Section 404 of the CLARITY Act, which reportedly bans yield payments through any channel, including issuers, exchanges, and affiliates. Perera argues this closes every possible path for stablecoins to offer competitive returns.

He suggests Coinbase CEO Brian Armstrong withdrew support after recognizing these provisions, calling the bill “Dodd-Frank for digital assets.” Perera contrasts the US approach with China, where the e-CNY recently became interest-bearing, concluding that US crypto clarity may ultimately favor incumbents over innovation.

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