White House Weighs Dropping Support for Crypto Bill After Clash With Coinbase
The White House is reportedly reassessing its backing for the Digital Asset Market CLARITY Act after a dramatic rupture with Coinbase, which publicly withdrew support for the current Senate draft and warned it would damage key parts of the crypto ecosystem, including DeFi, stablecoins and tokenized assets.
According to reporting by Fox Business journalist Eleanor Terrett, citing a source close to the Trump administration, officials are “furious” over Coinbase’s move and now considering walking away from the bill entirely if the exchange does not return to the table and accept a compromise, particularly on the contentious issue of stablecoin yields.
The source characterized Coinbase’s decision as a blindsiding “rug pull” against both the administration and the broader digital asset industry. The White House, the source said, believed it was working in tandem with major market players to push forward a framework that would clarify U.S. rules for digital assets, only to see one of its most visible partners abruptly reverse course.
“This is President Trump’s bill at the end of the day, not Brian Armstrong’s,” the source reportedly said, underscoring the growing tension between political leadership and one of the sector’s most influential companies.
Coinbase: “No Bill Is Better Than a Bad Bill”
The rift became public when Coinbase CEO Brian Armstrong announced that the exchange could not support the Senate Banking Committee’s current draft of the CLARITY Act. In his view, the proposal would end up doing “more harm than good” to the U.S. crypto market.
Armstrong argued that the right approach is to halt progress on a flawed framework rather than rush it through: “We’d rather have no bill than a bad bill. Hopefully we can all get to a better draft.” His statement signaled that Coinbase is prepared to accept continued regulatory uncertainty rather than endorse legislation it considers fundamentally misguided.
Among Armstrong’s biggest objections:
– A de facto ban on tokenized equities, which he believes would suffocate a promising avenue for digitizing traditional financial assets.
– Sweeping constraints on decentralized finance (DeFi), potentially shutting down or severely limiting core protocols and products that operate without intermediaries.
– Provisions expanding government access to user financial data, raising serious concerns over privacy and surveillance.
In addition, Armstrong warned that the bill would weaken the Commodity Futures Trading Commission (CFTC) while further empowering the Securities and Exchange Commission (SEC), a regulator that many in crypto see as hostile due to its aggressive enforcement-driven stance.
Stablecoins at the Center of the Fight
The most explosive dispute revolves around stablecoins, especially the yield or rewards users earn on these dollar-pegged assets. Armstrong and other industry voices say the draft bill would effectively “kill rewards” on stablecoins by making it difficult or impossible for platforms to offer interest-like returns.
From the industry’s perspective, this shift would not be about protecting consumers, but about insulating traditional banks from competition. In recent years, some stablecoins have offered yields around 5%, dramatically higher than what many retail customers receive on savings accounts at banks. Banking groups have openly warned that such returns could draw significant deposits away from the legacy financial system.
Critics of the bill argue that the current language aligns too closely with these banking concerns, turning stablecoin regulation into a tool for defending incumbent institutions rather than supporting innovation and financial inclusion.
Supporters of tighter rules, however, insist that unchecked stablecoin yields represent hidden risks to consumers and the broader financial system. They claim that without strict oversight and banking-style capital requirements, high yields could mask liquidity, reserve, or counterparty weaknesses that only become visible in times of stress.
A Divided Crypto Industry
The fallout from Coinbase’s announcement has laid bare divisions across the digital asset sector. Many users and builders applauded the exchange’s stance, accusing lawmakers and traditional financial players of trying to freeze out open competition.
Supporters argue that the bill, as drafted, reads less like a framework for innovation and more like a defensive playbook for banks. They highlight that restricting DeFi, banning tokenized equities and eliminating stablecoin rewards would disproportionately harm younger, tech-savvy users and startups that rely on these tools for access to capital and new financial products.
Yet others in the industry are uneasy with Coinbase’s confrontational approach. They contend that no single company should wield such outsized influence over legislation that will shape rules for every exchange, protocol, wallet provider and developer in the country.
“Coinbase is not crypto. Coinbase is one exchange in crypto,” one critic noted, arguing that the company’s withdrawal, while high profile, does not represent a consensus view. For this group, imperfect legislation may be preferable to a continued regulatory vacuum that invites case-by-case enforcement and legal uncertainty.
Why the CLARITY Act Matters
The CLARITY Act was pitched as a long-awaited attempt to define a clear market structure for digital assets in the United States. At its core, it aims to address several unsettled questions:
– Which tokens are securities and which are commodities?
– How should trading platforms be supervised and by whom?
– What is the proper regulatory treatment for stablecoins, tokenized securities and DeFi protocols?
– Where should the dividing line be drawn between the SEC and the CFTC?
For years, crypto firms have complained that the U.S. operates by “regulation by enforcement” rather than transparent rulemaking. The promise of CLARITY was to move away from that patchwork approach and give companies explicit guidelines for compliance.
That is precisely why the White House sees Coinbase’s reversal as so damaging: a company that heavily lobbied for clearer rules is now walking away at the critical moment, raising doubts about whether any bill could satisfy major market participants.
Political Stakes for the White House
Beyond the policy details, the standoff carries clear political implications. The Trump administration has been attempting to position itself as pro-innovation and relatively pro-crypto, while still promising to safeguard consumers and the financial system.
Backers of the CLARITY Act in the administration view it as a signature achievement: a way to show that Washington can modernize financial rules without ceding leadership to other jurisdictions. If the White House ultimately drops support for the bill, it would be a highly visible setback and reinforce the perception that crypto legislation is too fraught to pass in a polarized environment.
At the same time, continuing to push a bill that has lost backing from one of the sector’s largest regulated exchanges carries risks of its own. Critics could frame it as siding with banks and regulators against the very innovators the legislation was supposed to help.
The SEC vs. CFTC Power Struggle
Underneath the public arguments about DeFi, stablecoins and privacy lies another long-running turf war: which agency should take the lead on digital assets.
Armstrong and many industry figures prefer a greater role for the CFTC, which they view as more familiar with commodity-like trading markets and more open to new asset classes. The current CLARITY draft, however, is seen by some as drifting towards an SEC-centric model, allowing the securities regulator to treat most tokens as securities and bring them under its existing framework.
This conflict goes beyond bureaucratic rivalry. Different agencies bring different philosophies, compliance burdens and enforcement styles. For startups and exchanges, whether a token is treated as a security or a commodity can dictate everything from listing procedures to disclosure obligations, custody rules and capital requirements.
If the bill tilts too heavily toward the SEC, critics warn, it could lock in the most conservative, enforcement-first approach at the exact moment when other countries are experimenting with more flexible regimes for digital assets.
DeFi and Tokenized Equities: Innovation on the Line
The concern about a “de facto ban” on tokenized equities and heavy restrictions on DeFi cuts to the heart of crypto’s innovation narrative.
Tokenized equities allow traditional stocks and other financial instruments to be represented on blockchain infrastructure, potentially enabling 24/7 trading, fractional ownership and easier cross-border access. If the CLARITY Act bars or heavily restricts such products, it could push this experimental space offshore, where regulatory rules are looser or more accommodating.
DeFi faces similar pressures. Protocols that enable lending, borrowing, trading and yield generation without centralized intermediaries are particularly hard to fit into existing regulatory categories. Overly broad language in the bill could sweep in core DeFi building blocks and subject them to obligations that are nearly impossible for decentralized networks to meet.
For developers, the question is not simply whether rules exist, but whether those rules are tailored enough to recognize how non-custodial, open-source protocols actually function in practice.
Privacy, Surveillance and User Rights
Armstrong’s warning about expanded government access to financial records touches on another sensitive fault line: how much surveillance is acceptable in the name of compliance.
Crypto advocates have long argued that one of the technology’s core promises is giving individuals more control over their money and data, rather than consolidating both in the hands of large institutions and state actors. Provisions that make it easier for authorities to scrape, monitor or demand user information could undermine that vision.
On the other hand, regulators and law enforcement agencies insist that stronger monitoring powers are necessary to combat money laundering, sanctions evasion and illicit finance. The challenge for any legislation is designing mechanisms that satisfy legitimate enforcement goals without normalizing bulk data collection or creating open-ended surveillance capabilities.
The current CLARITY draft, according to critics, fails to strike that balance.
What Happens If the White House Walks Away?
If the administration ultimately withdraws support for the CLARITY Act, the immediate consequence is likely another extended period of legal gray areas and case-by-case enforcement. That outcome would frustrate companies that have been calling for rulemaking for years, but it might also prevent the enactment of what many in the industry see as a fundamentally flawed framework.
In practical terms, abandoning the bill could:
– Encourage more crypto firms to expand or move operations to jurisdictions with clearer, more favorable regulation.
– Leave U.S. courts and regulators to continue setting de facto rules through lawsuits and settlements.
– Delay the development of a stablecoin regime that balances consumer protection with competitive yields.
– Keep DeFi and tokenized assets in a legal limbo, slowing institutional adoption.
For policymakers, the risk is that the U.S. continues to lag in shaping the standards and infrastructures that could underpin the next generation of financial services.
The Road Ahead: Compromise or Stalemate
Whether the CLARITY Act survives now appears to hinge on renewed negotiations between the White House, Coinbase and other key stakeholders. The administration’s message, according to the reported source, is clear: either the industry accepts some concessions on stablecoins and other contentious points, or the bill may be shelved.
From the industry side, the demand is equally stark: regulations must not entrench incumbents, neuter DeFi, ban tokenized securities or open the door to unchecked financial surveillance.
Between these positions lies the difficult but necessary work of compromise. Crafting a durable framework for digital assets will require lawmakers to distinguish between genuine systemic risks and mere threats to legacy business models, and to write rules that can evolve as technology changes.
For now, the clash between the White House and Coinbase over the CLARITY Act has become a high-profile test of whether Washington and the crypto sector can find common ground—or whether political brinkmanship and mistrust will keep the United States stuck on the sidelines of the next wave of financial innovation.