Coinbase is walking a tightrope in Clarity Act negotiations, telling U.S. senator teams that the company is unhappy with where lawmakers ended up in their latest compromise, according to people familiar with the matter, but it has not openly stated its opposition.
The proposed deal was presented to crypto industry stakeholders on Monday and to the banking industry on Tuesday. From the crypto industry side, reactions have been mixed, according to people familiar with Monday’s meeting. Some stakeholders were dissatisfied — notably Coinbase — but others were “pleasantly surprised,” one of the people said. No one has been able to take a copy of the text with them and it has not yet been put into circulation.
Those familiar with Monday’s meeting said there were still issues to be resolved and suggested the proposal could hamper stablecoin-related products and services beyond what they had hoped.
The new proposal would require certain regulatory agencies to write rules establishing how, exactly, issues such as awards could be monitored. Some are concerned that regulators are issuing subjective criteria for how permitted activities would be governed, noting that there may ultimately be different types of rewards programs. Any regulation should be neutral, they said.
And the language was also said to potentially restrict companies’ ability to tie rewards to the size of stable transactions on an account, which could pose a barrier for a program similar to credit card rewards.
During the months of negotiations, Coinbase CEO Brian Armstrong has been a leading voice, and his opposition to an earlier effort to compromise on the coins’ stable yield helped derail a planned Senate hearing. A White House favorite in the crypto space, Armstrong is at the helm of the company that potentially has the most to lose by scaling back its stablecoin rewards programs.
On an industry call this week, people said Coinbase was in conflict with others over the bill, suggesting a divide in crypto views on how to proceed. Giving up some stablecoin rewards could be costly for some, but losing the Clarity Act’s full-fledged establishment of crypto within the US financial system is – for others – seen as a greater risk.
The updated text that will be released – expected late this week or early next week – will likely have been revised from the text shared Monday and Tuesday, although it is unlikely that lawmakers will want to rewrite too much of the long-debated text.
So far, bankers have not publicly shared their views on the proposal.
Potential crypto industry concerns over the approach outlined this week, first reported by CoinDesk, have already caused market chaos for major US stablecoin issuer Circle and shares of Coinbase. Circle stock fell 20% on Tuesday, although it rose slightly on Wednesday. However, Tuesday’s news from its main rival, Tether, regarding submitting to an audit may have been another factor in the fall of Circle’s shares, observers noted.
Despite negative responses to the Clarity Act revisions, Patrick Witt, the White House crypto advisor, criticized “uninformed” people who make predictions about the status of the Clarity Act. “Everything will work out,” he posted on the social networking site X (formerly Twitter) on Wednesday. “Bullish.”
One of those who advocate taking a step back:
“Everyone should take a chill pill and stay off Twitter,” the person said.
