Analyst Says CLARITY Act Delays Help Crypto Markets
- CLARITY Act pause followed Coinbase exit, delaying rules and reducing market shock.
- DeFi and stablecoin yield limits triggered objections from crypto firms across markets.
- SEC versus CFTC authority and amendments are important negotiation points now.
The CLARITY Act’s failure to advance in the U.S. Congress last week changed crypto market expectations. The pause followed Coinbase’s withdrawal of support on Wednesday, ahead of a scheduled hearing in Washington. Market analyst Michaël van de Poppe said the delay prevents restrictive rules, keeps negotiations open, and reduces immediate regulatory shock across crypto markets.
The bill sought to define oversight roles for the SEC and CFTC while setting rules for DeFi, stablecoins, and tokenized assets. However, the process stalled after industry concerns surfaced quickly.
Coinbase Withdrawal and Sudden Legislative Reset
Coinbase’s decision to withdraw backing late Wednesday disrupted months of coordinated negotiations. CEO Brian Armstrong publicly listed objections, including limits on tokenized stocks and yield-bearing stablecoins. He also cited government access to DeFi user records as a major concern.
As a result, the Senate Banking Committee canceled the CLARITY Act hearing less than twelve hours before it began. However, lawmakers resumed discussions by Friday through calls with Democrats, staffers, and industry participants. Coinbase confirmed it continues engaging in those talks.
Meanwhile, Armstrong rejected claims that White House officials threatened to abandon the bill. According to him, negotiations with the White House remained constructive. Fox Business reporter Eleanor Terrett had earlier reported possible tension, which Armstrong denied directly.
Van de Poppe compared the pause to Europe’s MiCA process, which required multiple revisions. He noted that early approval could have harmed markets broadly. Therefore, the delay now aligns stakeholders around further revisions rather than rushed passage.
DeFi and Stablecoin Yields Raise Core Objections
Concerns intensified around provisions affecting decentralized finance platforms. Notably, a new DeFi language appeared in the final draft without prior circulation. Those sections proposed extending Bank Secrecy Act obligations to certain DeFi activities.
Critics warned the approach could force centralized control over platforms labeled decentralized. Additionally, the bill granted the Treasury authority to restrict interactions involving self-hosted wallets. Industry participants said such powers risked limiting core blockchain functions.
Stablecoin yield provisions sparked equal concern. Banking groups supported limits on digital asset platforms offering direct yield rewards. However, crypto firms argued the restrictions blurred distinctions between stablecoins and insured bank deposits.
Moreover, proposed amendments aimed to tighten yield rules further. Senators from both parties questioned allowing rewards through staking or transactions. That debate highlighted unresolved tensions between banks and crypto platforms.
Related: Senate Committees Set Jan. 15 Votes on Crypto Market Rules
Oversight, Tokenization, and Amendment Risks
The bill also expanded SEC authority over network tokens tied to managerial efforts. That definition could classify many tokens as securities. Critics said it imposed heavy disclosure requirements while limiting regulatory flexibility.
Armstrong argued the structure weakened the CFTC and favored the SEC. He also warned that the framework created a de facto ban on tokenized equities. However, firms including Securitize and Dinari disputed that interpretation.
Beyond base provisions, more than seventy amendments raised alarms. One proposal linked to Senator Angela Alsobrooks called for strict rulemaking and anti-evasion penalties. Industry participants said those measures risked harsh enforcement for minor violations.
Additionally, lawmakers debated ethics provisions tied to President Donald Trump’s crypto ventures. Democrats also sought bipartisan leadership requirements for regulators. After a quiet Thursday, talks resumed on Friday, though no new hearing date emerged.
Meanwhile, the CLARITY Act stalled after Coinbase withdrew support, halting a rushed legislative process. Analysts and lawmakers then reopened negotiations to address DeFi, stablecoins, and securities oversight. The bill remains active, with revisions expected as discussions continue.
