US Regulatory Split: Ripple Backs Clarity Act While Coinbase Withdraws

The legislative path for the Digital Asset Market Clarity Act of 2025 (H.R. 3633) has hit a significant roadblock in early 2026. After successfully passing House committees last year, the bill stalled in the Senate Banking Committee following a sudden withdrawal of support from Coinbase.

This regulatory stalemate highlights a growing divide within the crypto industry. While some firms view the current draft as a necessary step toward legal certainty, others argue that recent Senate revisions introduce systemic risks to decentralized finance and exchange revenue models.

Key Takeaways

• Coinbase withdrew its support for the Clarity Act, citing concerns over de facto bans on tokenized equities and stablecoin reward restrictions.
• Ripple CEO Brad Garlinghouse continues to back the bill, arguing that regulatory clarity is preferable to the current state of enforcement-led chaos.
• Banking lobbyists have pushed for the elimination of stablecoin rewards to prevent a projected $6 trillion capital flight from traditional bank deposits.

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Coinbase Challenges Senate Revisions to the Clarity Act

Coinbase CEO Brian Armstrong has been vocal about his opposition to the latest Senate draft of the Clarity Act.8 The company argues that the bill has moved away from its original intent by introducing "prohibitions" on decentralized finance and expanding the SEC's authority over the CFTC.

A major point of contention involves a perceived de facto ban on tokenized equities. Coinbase maintains that the current language would stifle innovation by making it impossible to bridge traditional securities with blockchain technology under a clear framework.

Furthermore, the bill includes provisions that would curb stablecoin rewards, a move that could significantly impact the revenue of major exchanges.12 Coinbase reportedly earns roughly $300 million quarterly from its partnership with Circle, a revenue stream tied directly to USDC rewards.

Industry analysts estimate that the proposed curbs could result in a $1 billion annual revenue loss for Coinbase. The company has mobilized its StandWithCrypto initiative, generating over 250,000 messages to Congress to protect consumer interests in stablecoin yields.

Sources: X - @brian_armstrong

Read more: Coinbase Thinks New US Tax Rules Could Boost Crypto Prediction

Ripple and Supporters Prioritize Market Certainty

In contrast to Coinbase, Ripple continues to champion the Clarity Act as a vital piece of legislation. CEO Brad Garlinghouse recently emphasized that the industry is "so close" to achieving a framework and that "clarity beats chaos" in the long term.

Ripple is joined by other major players, including Kraken and venture firm Andreessen Horowitz. These supporters argue that even an imperfect bill provides a baseline for compliance that would allow institutional capital to enter the market with confidence.

The bill's proponents believe that establishing the CFTC as the primary regulator for "digital commodities" is a major victory.21 This classification would move assets like Bitcoin and post-merge Ethereum away from the SEC’s more stringent security oversight.

Senate Banking Chair Tim Scott and other bipartisan leaders continue to push for progress. They argue that the legislation is essential for national security and for ensuring that the future of financial innovation remains within the United States.

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Stablecoin Stakes and the Banking Industry Pushback

The battle over stablecoin rewards is not just an internal crypto debate but a direct conflict with traditional banking. Financial institutions have lobbied heavily against stablecoin yields, which often reach 3.5% compared to traditional bank rates of less than 1%.

Bank of America’s leadership has warned that these rewards could trigger a massive $6 trillion "deposit flight." This would drain liquidity from community banks and undermine their ability to provide local lending and mortgages.

The Senate draft largely delivers on the banking industry’s requests by restricting rewards linked solely to holding stablecoins. While there are "loopholes" for activity-based rewards, the language remains a significant barrier for crypto platforms.

As the 2026 midterm elections approach, the window for passing the Clarity Act is narrowing. The current gridlock leaves the U.S. crypto market in a state of flux, with market participants divided on whether to accept a flawed bill or fight for more favorable terms.

Conclusion

The stalling of the Clarity Act represents a pivotal moment for the U.S. digital asset ecosystem. While Ripple and its allies are willing to compromise for the sake of established rules, Coinbase is taking a stand against provisions it views as a threat to the core of Web3 innovation.

The outcome of this legislative battle will define the competitive landscape between crypto exchanges and traditional banks for years to come. Until a consensus is reached, the "chaos" Garlinghouse warned of is likely to persist as the dominant regulatory reality.

FAQ

Why did Coinbase stop supporting the Clarity Act?

Coinbase withdrew support because the Senate draft included a de facto ban on tokenized equities and expanded the SEC’s authority. They also objected to restrictions on stablecoin rewards that could cost the company $1 billion in annual revenue.

What is Ripple’s stance on the legislation?

Ripple CEO Brad Garlinghouse remains a supporter, stating that the industry needs the clarity provided by the bill to end the current era of regulatory uncertainty. He believes the bill is a critical step forward despite its flaws.

How does the Clarity Act affect stablecoin rewards?

The bill seeks to limit or ban "savings-like" rewards on stablecoins that compete with traditional bank deposits. This is intended to prevent capital flight from the banking system into high-yield digital asset platforms.

What are the main growth drivers for the bill’s opposition?

Opposition is driven by concerns over privacy, the restriction of DeFi activities, and the fear that the bill favors traditional financial institutions over crypto-native startups and retail investors.

Will the Clarity Act pass in 2026?

Passage remains uncertain due to the lack of industry consensus and the impending 2026 midterm elections. The Senate Banking Committee markup was delayed, and more than 130 amendments are currently under consideration.

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