Coinbase Warns: CLARITY Act Poses Far Greater Complexity Than Stablecoin Legislation

Forget the stablecoin debate—the real regulatory monster is just waking up.

The Regulatory Maze

Coinbase's latest analysis throws cold water on any notion of simple crypto lawmaking. While stablecoin bills get the headlines, the proposed CLARITY Act represents a legislative hydra—multiple heads of compliance, conflicting jurisdictions, and enough bureaucratic red tape to strangle innovation. It doesn't just create rules; it builds an entire parallel governance structure.

Complexity as a Weapon

Watch where the real friction emerges. Complex legislation often serves as a quiet veto—a way for traditional finance gatekeepers to maintain control by making compliance so burdensome that only the old giants can play. It's the regulatory equivalent of moving the goalposts during the game, a classic move from the Wall Street playbook that prioritizes protectionism over progress.

The compliance costs alone could dwarf those of straightforward payment-focused stablecoin rules. We're talking about layered reporting requirements, dual-state-and-federal oversight frameworks, and definitional gray areas wide enough to drive a truck full of legal briefs through.

Bottom line: Sometimes the most dangerous legislation isn't what it bans, but what it buries you in. While everyone watches the stablecoin fight, the real battle for crypto's soul is being written into thousand-page bills that only lawyers will ever fully understand—and even they'll need a flowchart.

Regulatory Momentum Builds Despite Technical Hurdles

D’Agostino emphasized that market structure legislation represents foundational infrastructure for crypto’s growth, justifying extended negotiations despite industry frustration.

“The rest of the world is moving forward,” he said, citing Europe’s MiCA framework and regulatory clarity in jurisdictions like the UAE as competitive threats forcing congressional action.

While prediction markets assign varying probabilities to the first-quarter passage, D’Agostino expressed strong Optimism rooted in global competitive dynamics.

“We saw in 2024 this massive flight of talent, of people, of intellectual capital, and of technology growth outside of the US,” he explained.

The same urgency that drove stablecoin legislation through the GENIUS Act will ultimately overcome remaining disagreements once lawmakers return from recess, he argued.

The current CLARITY Act draft assigns the CFTC primary authority over non-security fungible tokens that meet decentralization tests, while codifying SEC oversight for tokens tied to ongoing managerial efforts and revenue-sharing features.

Lobbyists reviewing recent redlines indicate the bill would treat DeFi front-end operators and fee-collecting DAOs as registrants while preserving safe harbors for Immutable smart contracts without upgrade keys.

Banking Committee members from both parties have told industry groups they want to avoid repeating prior cycles in which House-passed digital asset bills died in the Senate without committee votes.

A clean markup yielding a bipartisan manager’s amendment WOULD create a path to 60 floor votes. However, staff expect aggressive amendments on DeFi custody, sanctions enforcement, and crypto-native stablecoin rewards in retirement accounts.

Crypto funds, including $BTC and $ETH, shed $952M as regulators stall the Clarity Act, but $SOL and $XRP still saw inflows.#Ethereum #ClarityAct #Bitcoin https://t.co/Cla1X1nayc

Stablecoin Framework Provides Roadmap for Broader Reform

D’Agostino pointed to the GENIUS Act’s success as evidence that comprehensive regulatory clarity unlocks institutional adoption.

“Since that GENIUS bill has been absorbed and thought through and people understand how to comply with it we are seeing just the tip of the iceberg on stable coin launches,” he noted.

The stablecoin framework enabled major financial institutions like JP Morgan and Citigroup to enter the market while allowing companies with strong consumer ecosystems to experiment with branded payment tokens.

D’Agostino predicted that market structure legislation would create similar unlocks for non-financial companies seeking to integrate blockchain across supply chains and customer interactions.

Beyond enabling traditional institutions, comprehensive frameworks reduce regulatory risk for companies operating at the technical frontier of crypto.

D’Agostino highlighted that market structure clarity allows “institutions outside of cryptonative who are less comfortable with taking idiosyncratic regulatory risk to feel very confident engaging their customers on a blockchain or crypto platform.“

Banking Industry Pushback Threatens Stablecoin Innovation

While celebrating the GENIUS Act’s passage, D’Agostino warned that traditional banking interests are continuing to push restrictions on stablecoin yields during ongoing Senate negotiations.

Coinbase chief policy officer Faryar Shirzad recently raised concerns that limiting rewards could weaken the global competitiveness of dollar-backed stablecoins, as China moves to make its digital yuan interest-bearing starting January 1, 2026.

D’Agostino dismissed banking arguments that yield-bearing stablecoins threaten deposit-funded lending models.

Banks currently earn roughly 4% on reserves held at the Federal Reserve with little incentive to share returns, he explained, while stablecoin platforms view passing yield to users as Core product value.

Senator Cynthia Lummis reinforced industry urgency, stating that “unclear rules have pushed digital asset companies offshore” and emphasizing bipartisan commitment to establishing clear jurisdiction and strong protections.

For far too long, unclear rules have pushed digital asset companies offshore. Our market structure legislation changes that by establishing clear jurisdiction, strong protections, and ensuring America leads the way. Let’s get this done!

Despite record government shutdowns disrupting the legislative calendar, D’Agostino maintained that competitive pressures from jurisdictions offering regulatory certainty will force congressional action once members return to work.