As the January 15 markup of the crypto market structure bill—known as the CLARITY Act—approaches, reports suggest Coinbase (COIN) is reconsidering its support for the legislation. A Monday report from Bloomberg indicates this shift depends on whether the bill includes provisions that go beyond enhanced disclosure requirements for stablecoin rewards.
High Stakes for Coinbase
The CLARITY Act is expected to be marked up in at least one Senate committee this Thursday, and Coinbase’s potential withdrawal could significantly impact the bill. A source familiar with Coinbase’s position told Bloomberg the exchange would re-evaluate its support if the legislation moves too far from its interests, especially concerning stablecoin incentives.
Some insiders believe the bill may restrict the ability to offer rewards to regulated financial institutions, aligning with the banking sector’s concerns about losing deposits to crypto platforms. Coinbase currently has applications pending for a national trust charter, which could allow it to provide such rewards under regulatory rules. However, many crypto-native companies are resisting potential restrictions, arguing they could stifle market competition.
The stakes are high for Coinbase, as rewards programs are a key part of its business model. The exchange allows users to earn 3.5% rewards on holdings of Circle’s USDC. If the market-structure bill bans these incentives, fewer users might choose to hold stablecoins on the platform. This could threaten an anticipated revenue stream projected to reach $1.3 billion in 2025, according to Bloomberg.
Banking vs. Crypto
The GENIUS Act, passed into law last July, prohibits stablecoin issuers from offering interest on token holdings but does not prevent third-party partners like Coinbase from providing rewards tied to customer balances. The banking industry, however, argues that allowing exchanges to pay such rewards could negatively affect bank deposits and, in turn, community lending.
As reported by Bitcoinist over the past month, the American Bankers Association (ABA) has expressed concerns that this could displace “billions” from local lending, potentially harming small businesses and households. In contrast, Coinbase’s chief policy officer, Faryar Shirzad, has argued that maintaining stablecoin rewards is essential for preserving the dollar’s dominance, especially after China announced it would start offering interest on its digital yuan.
Banking Lobby Fights Back
A potential compromise under discussion would allow only licensed banking entities or financial institutions to provide rewards on stablecoin balances. Recently, five crypto firms, including Ripple, Circle, and Paxos, received conditional approvals from the U.S. Office of the Comptroller of the Currency (OCC) to become national trust banks—a move opposed by the banking lobby.
If restrictions are imposed, the report suggests crypto firms may seek creative workarounds to continue rewarding customers.
Frequently Asked Questions
FAQs Coinbase the Crypto Market Structure Bill
Beginner Questions
1 What is the crypto market structure bill
Its a proposed law in the US Congress aimed at creating clearer rules and regulations for the cryptocurrency industry defining which agencies oversee different crypto activities
2 Why is Coinbase considering withdrawing support
Coinbase may believe the latest version of the bill no longer adequately protects consumers or fosters innovation or it might contain provisions that could harm the crypto ecosystem
3 What does withdrawing support mean
It means Coinbase would publicly reverse its previous endorsement of the bill likely through statements or lobbying efforts urging lawmakers to oppose or significantly revise it
4 What is the January 15 deadline
This is likely a key procedural deadline for the bill to advance in the current legislative session Missing it could delay or effectively kill the bills progress
5 How could this affect everyday crypto users
If the bill fails or is delayed the current regulatory uncertainty in the US may continue which could impact innovation consumer protections and the longterm stability of crypto services
Intermediate Advanced Questions
6 What specific changes to the bill might have caused Coinbases reconsideration
Possible reasons include unfavorable amendments on which assets are deemed securities overly restrictive rules for decentralized finance or insufficient clarity on how crypto exchanges are regulated
7 What are the potential risks for Coinbase if it withdraws support
It could strain relationships with supportive lawmakers be seen as an unreliable advocacy partner or face backlash if the bills failure leads to a stricter regulatory crackdown from agencies like the SEC
8 What are the potential benefits for Coinbase if it withdraws support
It could position Coinbase as a principled defender of the crypto industry align with its user bases desires and allow it to push for a more favorable bill in the future
9 How does this relate to Coinbases ongoing legal battles with the SEC
This bill was seen by many as a potential legislative solution to the SECs aggressive enforcement approach Withdrawing support suggests Coinbase may no longer see it as a viable path to resolving that conflict
10 What are the broader implications for the crypto industry in the US
This move could signal a major split in industry lobbying strategy potentially weakening the