The long-awaited Digital Asset Market Clarity Act (CLARITY Act) has hit a massive legislative wall this week, plunging the U.S. crypto regulatory framework back into uncertainty. In a stunning turn of events, the Senate Banking Committee indefinitely postponed its markup hearing for the bill—originally scheduled for mid-January—following a blistering public rejection by Coinbase CEO Brian Armstrong. Speaking from the sidelines of the World Economic Forum in Davos 2026, Armstrong labeled the current draft a "bad bill" that would hand the crypto industry over to traditional finance and stifle American innovation.

Armstrong's Davos Bombshell: "No Bill is Better Than a Bad Bill"

The collapse of the bill's momentum can be traced directly to Armstrong's interventions at the World Economic Forum. In a series of high-profile interviews with Bloomberg and CNBC, the Coinbase executive didn't mince words. He characterized the latest amendments to the CLARITY Act as a "de facto ban" on critical sectors of the crypto economy, specifically targeting DeFi and tokenized real-world assets.

"We have reached a point where the language in this bill actually takes us backward," Armstrong told reporters on Tuesday. "It erodes the authority of the CFTC, making it subservient to the SEC, and it effectively hands a monopoly on stablecoin rewards to big banks. I've been clear with Washington: we would rather have no bill than a bad bill that kills the industry in America."

Sources close to the negotiations reveal that Coinbase's sudden withdrawal of support—joined by other major players like Circle—left Senate Banking Committee Chairman Tim Scott (R-SC) with little choice but to pull the bill from the calendar. The move has reportedly sparked fury within the White House, which had viewed the legislation as a key deliverable for early 2026.

Why Coinbase Rejected the Digital Asset Market Clarity Act

For months, the Digital Asset Market Clarity Act (H.R. 3633) was seen as the best hope for establishing a comprehensive regulatory regime. However, recent changes to the text set off alarm bells at Coinbase and other crypto-native firms. Armstrong highlighted four specific "poison pills" in the legislation that prompted his revolt:

  • DeFi Prohibitions: New clauses would require decentralized finance protocols to maintain centralized compliance records, which Armstrong argued would effectively ban privacy and grant the government "unlimited access" to user financial data.
  • Tokenized Equities Ban: The bill would impose restrictive securities laws on tokenized assets, potentially outlawing the trading of tokenized stocks and real estate on blockchain rails.
  • Stablecoin Monopoly: In what Armstrong called an "un-American" move, the draft restricts non-bank issuers from offering yield or rewards on stablecoins, protecting traditional banks from fintech competition.
  • CFTC vs. SEC Power Grab: While the bill nominally empowers the CFTC, industry lawyers argue the fine print leaves the door open for the SEC to retain aggressive oversight over digital commodities, negating the "clarity" the act promised.

Industry Divided: Ripple vs. Coinbase

Not all industry giants are aligned with Armstrong's scorched-earth approach. Reports indicate a growing rift, with Ripple leadership expressing continued support for the bill, arguing that imperfect legislation is a necessary first step to end the "regulation by enforcement" era. This split highlights the complex US crypto regulation 2026 landscape, where the interests of payment processors, exchanges, and DeFi developers are increasingly diverging.

Senate Banking Committee Scrambles for a Path Forward

The postponement is a significant blow to Chairman Tim Scott, who took the gavel in 2025 promising to finalize a crypto framework. With the 2026 midterms looming, the window for passing complex financial legislation is rapidly closing. The delay also empowers skeptics on the committee, including Ranking Member Elizabeth Warren, who has long warned that the bill lacked sufficient consumer protections.

Political analysts suggest that without Coinbase's backing, the bill is effectively dead in the water. As one of the largest donors in the 2024 and 2026 cycles, the exchange holds significant sway over key congressional votes. The Coinbase regulatory battle has now shifted from the courts to the heart of the legislative process, with Armstrong proving he is willing to spend political capital to kill legislation he views as an existential threat.

Market Reaction and What's Next

The market response was immediate and negative. Shares of crypto-linked stocks and major tokens dipped as the news of the stall broke, erasing gains from the early January rally. Investors are now grappling with the reality that the crypto market structure bill may be delayed until 2027 or beyond.

For now, the industry remains in a precarious limbo. While the "regulation by enforcement" era continues, Armstrong's gamble at Davos 2026 sends a powerful signal: the crypto industry has grown powerful enough to veto Washington's plans, but it remains to be seen if it is united enough to write its own.