The Senate’s recent draft of the CLARITY Act has sparked significant debate, revealing deep divisions within the cryptocurrency sector and presenting a clash between traditional banking interests and digital asset innovators. Set for review by the Senate Banking Committee on January 15, 2026, the session was postponed to late January after facing unexpected pushback, notably from Coinbase CEO Brian Armstrong, who retracted his support just hours before the meeting. This delay, mirrored by the Senate Agriculture Committee, highlights the absence of bipartisan agreement and illustrates how entrenched interests are delaying legislative progress amid disagreements over consumer protection, innovation, and regulatory authority.

Banking Lobby vs. Crypto Innovation: The Yield Ban Flashpoint

The central point of contention involves restrictions on stablecoin yields. Banking associations are allegedly advocating for measures that protect their $6.6 trillion deposit market from competition. Fifty-three banking groups, including the American Bankers Association and various state-level organizations, have lobbied for limits on yields for idle stablecoin holdings, arguing they pose a threat to traditional lending and community banking models. Critics argue that this represents regulatory capture, with institutions like Bank of America cautioning against a potential $6 trillion shift to stablecoins if yields are permitted, effectively using legislation to stifle competition rather than foster innovation.

On the cryptocurrency side, these actions have led to accusations that the draft unfairly favors established financial interests, hindering financial inclusion for unbanked populations in emerging markets who depend on stablecoins for returns not available through traditional banks. Armstrong has been outspoken against these provisions, accusing banks of attempting to “ban their competition.” His opposition contributed to the delay in the markup, causing market fluctuations as Bitcoin saw a 2% decline.

Industry Schism: Coinbase’s Stand vs. Broad Support

Within the cryptocurrency industry, a notable divide has surfaced. Coinbase’s sudden withdrawal from the draft discussion has created ripples, leading to the postponement and highlighting internal conflicts. Armstrong criticized the draft for undermining privacy with DeFi restrictions, effectively banning tokenized equities, and reducing the Commodity Futures Trading Commission’s (CFTC) authority in favor of the Securities and Exchange Commission (SEC). This stance aligns Coinbase as a central critic, advocating that “a bad bill is worse than no bill.” Armstrong’s position has garnered support from developers and firms like Etherealize, who argue that the draft’s narrow criteria for decentralization, extensive disclosure requirements, and conflicting definitions of DeFi could overwhelm smaller teams and facilitate surveillance.

In contrast, key industry figures such as Robinhood CEO Vlad Tenev, Andreessen Horowitz, Circle, Paradigm, Kraken, and Ripple continue to support the draft, seeing it as a step toward bipartisan agreement despite its flaws. Tenev, for example, highlighted a “path forward” for features like staking, which sharply contrasts with Coinbase’s perspective. This illustrates the potential for self-interest—such as the creation of regulatory barriers for larger exchanges—to intensify internal divisions. The rift has led to allegations of betrayal, with some perceiving Coinbase’s stance as obstructive to user interests and progress, while others view the supporters as compromising essential crypto values.

Regulatory Turf Wars: SEC vs. CFTC and Developer Protections

Another major fault line lies in the jurisdictional balance between the SEC and CFTC, where critics like Armstrong claim the draft subordinates the CFTC, potentially stifling innovation through stricter SEC oversight. This has sparked concerns from developers about mandatory registrations and surveillance, which could criminalize permissionless DeFi and force innovation overseas. Organizations like the North American Securities Administrators Association (NASAA) add to the tension by pushing for stronger investor protections, clashing with crypto advocates who fear overreach.

Supporters, including Senate Republicans, counter that the draft protects developers and closes loopholes without undue burdens, but the 137 proposed amendments reflect unresolved debates. This turf war is prolonged by the need for bipartisan buy-in, with figures like Senators Tim Scott and John Boozman delaying proceedings to negotiate with Democrats like Cory Booker, revealing how political maneuvering is a key driver of impasse.

Political and Broader Stakeholder Pressures

On the political front, the delays stem from insufficient votes, with Senate leaders like Boozman prioritizing consensus amid midterm pressures, potentially pushing resolution into 2027. Crypto skeptics in Congress, influenced by banking lobbies, are seen as entrenching anti-competitive elements, while pro-crypto voices like Senator Cynthia Lummis advocate for refinements to maintain U.S. leadership.

Broader sentiment on platforms like X and Reddit shows pessimism, with users accusing the draft of fostering surveillance and regulatory capture, further polarized by figures like Armstrong whose actions have galvanized opposition. As negotiations continue, these divides—fueled by banking influence, industry infighting, and political calculus—threaten to prolong uncertainty, with stakeholders like Coinbase wielding outsized power to shape or derail the outcome.