Why was Coinbase able to halt the CLARITY Act voting agenda with just one sentence?

Title: The Biggest U.S. Crypto Company Asserts Its Power in Washington Author: David Yaffe-Bellany, The New York Times Translation: Peggy, BlockBeats

Author: Rhythm BlockBeats

Source:

Reprint: Mars Finance

Editor’s Note: The Clarity Act, which was about to enter a critical voting stage, was abruptly halted due to Coinbase CEO Brian Armstrong’s public opposition. The controversy centers on restrictions on interest payments for stablecoins and the boundaries of SEC authority. In fact, with the regulatory shift following Trump’s rise to power, the crypto industry has gradually shifted from “regulated entity” to “rule negotiator.” This intervention not only changed the voting process but also exposed the real interests behind crypto legislation.

Below is the original text:

After months of negotiations, an important cryptocurrency bill was scheduled for a committee vote in the Senate on Thursday, a key step in the legislative process.

However, shortly afterward, the largest U.S. crypto company Coinbase’s top executive spoke out on social media. Coinbase CEO Brian Armstrong wrote on X Wednesday evening: “Regrettably, Coinbase cannot support the current version of the bill. This version would clearly be worse than the existing regulatory environment. We would rather have no bill than a bad one.”

Hours later, the Senate vote was canceled.

Typically, the outcome of a controversial piece of legislation depends on a few moderate key senators amid party negotiations. But the changes to this milestone crypto bill this week highlight Coinbase’s enormous influence in Washington today — as the crypto industry’s status has rapidly risen since Trump’s presidency.

Over the past few months, congressional staff have been pushing forward 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 developed and driven by industry participation. But at the last moment, Armstrong opposed a proposed wording, believing it could risk banning one of Coinbase’s products; he also stated that the bill would grant excessive power to the U.S. Securities and Exchange Commission (SEC).

Coinbase’s decisive move is the result of years of ongoing political influence efforts in Washington. As a publicly traded company with a market value close to $70 billion, Coinbase funds a network of Political Action Committees (PACs), which in 2024 have contributed over $130 million to influence congressional elections, aiming to support more pro-crypto legislators.

This intense political investment sends a clear signal to Congress: anyone opposing the crypto industry could become a target.

Today, leading industry companies have enough leverage to push their interests. Georgia State University finance expert Todd Phillips said, “Coinbase’s move was very clever.” Coinbase’s spokesperson declined to comment.

Founded in 2012, Coinbase provides a platform for users to buy, sell, and store cryptocurrencies like Bitcoin and Ethereum. Anyone can log into its app and complete a purchase in just a few clicks.

But not long ago, the environment Coinbase faced in Washington was much harsher. In 2023, the SEC sued Coinbase, accusing it of operating as an unregistered exchange — part of the Biden administration’s broader crackdown on the crypto industry. At that time, Armstrong, co-founder of Coinbase, criticized the SEC’s approach as “law enforcement instead of regulation” and called for clearer crypto regulatory rules.

The situation changed dramatically in 2024 when Trump was elected president. Shortly before taking office, Trump and his sons launched a crypto-related business, and Trump publicly declared his intention to make the U.S. the “global crypto capital.”

Within weeks of Trump’s inauguration, the SEC withdrew lawsuits against Coinbase and other crypto firms. Subsequently, the industry pushed for legislation to codify this regulatory “rollback” into law, aiming to prevent future administrations from reinitiating harsh crackdowns on crypto.

In July this year, with government support, the House of Representatives passed its version of the Clarity Act, largely adopting the industry’s proposed new regulatory framework. The bill would make it easier for companies like Coinbase to argue that digital currencies are not securities, thus avoiding federal securities regulation designed to protect investors and markets.

However, the bill faced resistance in the Senate. Last fall, Senate Democrats proposed strict regulations on decentralized finance (DeFi), a branch of crypto, sparking strong industry opposition.

Meanwhile, banking lobbies pushed to include provisions in the bill that would prohibit Coinbase and other crypto exchanges from paying interest to holders of stablecoins. Stablecoins are digital currencies designed to maintain a 1 USD peg. The banking sector argued that such “interest-bearing products” offered by crypto exchanges would weaken traditional banking by competing with deposit accounts.

This issue quickly became a key concern for Coinbase. Banning interest payments could impact one of its revenue streams. Coinbase’s senior policy director Kara Calvert said, “Competing by offering these incentives is crucial.”

The latest draft of the Senate’s Clarity Act was released near midnight on Monday. Congressional staff and crypto executives immediately began reviewing the text, aiming to finish before the scheduled Senate committee markup on Thursday. This markup allows senators to propose amendments. As the markup approaches, despite other crypto leaders expressing support on social media, Armstrong announced he would withdraw his support.

On Wednesday evening, South Carolina Republican Senator and Senate Banking Committee Chair Tim Scott announced that the markup would be postponed, with no new date set. In a statement, he said, “Parties are continuing to communicate in good faith. Our goal is to establish clear ‘rules of the road’ that protect consumers, strengthen national security, and ensure the future of finance is built in the U.S.”