White House Weighs CLARITY Act Withdrawal Amid Coinbase Stablecoin Clash

The future of the Digital Asset Market Clarity Act (CLARITY Act) hangs by a thread this morning as the White House reportedly considers retracting its support for the landmark legislation. This dramatic potential pivot follows a public and acrimonious breakdown in negotiations between lawmakers and Coinbase, the largest cryptocurrency exchange in the United States. At the heart of the dispute is a controversial provision effectively banning stablecoin yields—a move Coinbase CEO Brian Armstrong has slammed as a "giveaway to big banks" that threatens to derail US crypto regulation in 2026.

The Stablecoin Yield Dispute: A $1 Billion Dealbreaker

The conflict erupted late last week when Coinbase abruptly withdrew its backing for the CLARITY Act (H.R. 3633), citing new amendments that would prohibit digital asset platforms from offering "passive yield" on stablecoins. For Coinbase, this is not a minor policy disagreement but an existential threat to a revenue stream projected to exceed $1 billion in 2025. The exchange argues that the provision, reportedly inserted at the behest of banking lobbyists, is designed to protect traditional financial institutions from competition.

Brian Armstrong took to social media to voice his frustration, declaring, "We'd rather have no bill than a bad bill." He argued that the legislation, in its current form, would be "materially worse than the status quo" by stripping Americans of the ability to earn interest on their digital assets while cementing the dominance of legacy banks. The banking sector, backed by Treasury analysis, has countered that unregulated stablecoin yields could risk up to $6.6 trillion in deposit flight, threatening the stability of the traditional lending system.

White House "Furious" at Coinbase's Move

Sources close to the administration describe the White House as "furious" with Coinbase's unilateral decision to walk away from the table just days before a critical Senate Banking Committee markup. Insiders characterize the move as a "rug pull" against both the administration and the broader crypto industry, which has spent years advocating for regulatory clarity. The White House had viewed the CLARITY Act as a cornerstone of President Trump's digital asset agenda, aiming to establish the U.S. as the "crypto capital of the planet."

Now, administration officials are reportedly weighing a "nuclear option": completely withdrawing support for the bill if Coinbase does not return to negotiations with a compromise on stablecoin yields. "The administration feels that one company cannot dictate the future of the entire US financial system," a source familiar with the talks revealed. This standoff has forced Senate Banking Committee Chair Tim Scott to indefinitely postpone the bill's markup, leaving the legislation in regulatory purgatory.

Banks vs. Crypto: The Battle for Financial Innovation

The breakdown of the CLARITY Act exposes the deepening fault lines between the burgeoning crypto sector and Wall Street incumbents. Armstrong has framed the conflict as a battle against "regulatory capture," accusing banks of using the legislative process to ban superior technology rather than competing on merit. "The banks are worried they're going to have to start paying higher rates to customers to compete," Armstrong noted in a recent interview, emphasizing that the ban on yields hurts everyday consumers most.

However, the banking lobby maintains that "interest-like" returns on stablecoins blur the line between crypto assets and insured bank deposits without offering the same consumer protections. They argue that allowing tech companies to offer yield without banking charters creates an uneven playing field and systemic risk. This ideological clash has now stalled the most significant attempt at crypto legislation since the industry's inception.

What's Next for US Crypto Regulation?

With the CLARITY Act on ice, the path forward for US crypto regulation in 2026 remains dangerously unclear. If the White House follows through on its threat to pull support, the bill is effectively dead, likely pushing any comprehensive regulatory framework into 2027 or beyond. This delay leaves the industry navigating a complex patchwork of enforcement actions and legal uncertainty, exactly the scenario the act was designed to prevent.

Industry observers are now watching closely to see if a compromise can be brokered. For the bill to survive, lawmakers must find a middle ground that addresses banking stability concerns without gutting the economic model of major crypto players. Until then, the standoff between the White House and Coinbase serves as a stark reminder of the high stakes involved in rewriting the rules of the global financial system.