Coinbase is walking a tightrope in the Clarity Act negotiation, telling U.S. senators’ staff that the company is unhappy with where lawmakers landed in their latest compromise, according to people familiar with the situation, but it has not openly declared its opposition.
The proposed deal was shown to crypto industry stakeholders on Monday and to the banking industry on Tuesday. From the crypto industry, it received mixed reactions, according to people familiar with Monday’s meeting. Some stakeholders were dissatisfied, most notably Coinbase, but others were “pleasantly surprised,” one of the people said. No one was able to take a copy of the text and it has not yet been circulated.
Those familiar with Monday’s meeting said there were still issues to resolve and suggested the proposal could impede stablecoin-related products and services beyond what they expected.
The new proposal would direct some regulatory agencies to draft rules setting out how, exactly, issues like rewards could be overseen. Some are concerned that regulators will issue subjective criteria for how permissible activity would be governed, noting that there may end up being different types of rewards programs. Any regulations would have to be neutral, they said.
And the language was also said to potentially restrict companies’ ability to tie rewards to the scale of stablecoin transactions in an account, which could be a roadblock for a program similar to credit card rewards.
Throughout the months of negotiations, Coinbase CEO Brian Armstrong has been a leading voice, and his opposition to an earlier effort to reach a compromise on stablecoin performance helped derail a planned Senate hearing. A White House favorite in the crypto sphere, Armstrong leads 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 clashed with others over the bill, suggesting a fracture in cryptocurrency opinions on how to proceed. Giving up certain stablecoin rewards could be costly for some, but losing the full establishment of cryptocurrencies within the US financial system under the Clarity Act is, for others, seen as a bigger risk.
The updated text to be released (expected later this week or early next week) will likely have been revised from text shared on Monday and Tuesday, although it’s unlikely 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 with the approach launched this week, first reported by CoinDesk, have already caused market chaos for leading US stablecoin issuer Circle and Coinbase stock. Circle shares fell 20% on Tuesday, although they rose slightly on Wednesday. However, Tuesday’s news from its main rival, Tether, of filing an audit may have been another factor in the hit to Circle shares, observers noted.
Despite negative responses to the Clarity Act reviews, White House crypto advisor Patrick Witt criticized “uninformed” people making predictions about the status of the Clarity Act. “It’s all going to work out,” he posted Wednesday on the social media site X (formerly Twitter). “Bullish.”
One of the people who advocate taking a step back:
“Everyone should take a break and stay off Twitter,” the person said.
