Senate Banking Committee Postpones CLARITY Act Vote Amid Industry Split and Regulatory Concerns

The Senate Banking Committee has postponed its scheduled markup of the Digital Asset Market CLARITY Act, halting what many anticipated would be a decisive week for cryptocurrency regulation in the United States. The delay follows mounting industry opposition and ongoing political disagreements over key provisions in the comprehensive market structure legislation ^[1][2].

Committee Chairman Tim Scott announced the postponement on the evening of January 14, stating that "everyone remains at the table working in good faith," though he provided no new timeline for when the markup might be rescheduled ^[2]. The Senate is scheduled to be out of session the following week for the Martin Luther King Jr. Day recess ^[2].

Coinbase Withdrawal Triggers Industry Debate

The immediate catalyst for the postponement came when Coinbase CEO Brian Armstrong announced around 4:00 p.m. on January 14 that his company was withdrawing support for the bill ^[2]. In a post on X, Armstrong stated: "After reviewing the Senate Banking draft text over the last 48hrs, Coinbase unfortunately can't support the bill as written" ^[1].

Armstrong elaborated that "we appreciate all the hard work by members of the Senate to reach a bipartisan outcome, but this version would be materially worse than the current status quo," adding that "we'd rather have no bill than a bad bill" ^[2]. His withdrawal represented a significant blow, given Coinbase's substantial investment in lobbying efforts on Capitol Hill ^[2].

However, the industry response was far from unanimous. Several major companies and advocacy groups—including a16z, Circle, Paradigm, Kraken, Ripple, Coin Center, and the Digital Chamber—publicly reaffirmed their support for proceeding with the markup ^[2]. Kraken co-CEO Arjun Sethi responded: "It is easy to walk away when a process gets difficult. What is hard and what actually matters is continuing to show up, working through disagreements, and building consensus in a system designed to require it" ^[2].

Notably, Circle and Coinbase held opposing positions despite their close business relationship, as Coinbase co-founded the USDC stablecoin with Circle and maintains a minority stake in the company ^[1].

Key Points of Contention

The legislation has faced criticism on multiple fronts. Armstrong specifically cited concerns about what he characterized as a de facto ban on tokenized equities and DeFi prohibitions that would grant the government expanded financial access ^[1].

Stablecoin rewards have emerged as one of the most contentious issues ^[2]. While the recently enacted GENIUS Act prohibits stablecoin issuers from directly paying yields, it leaves room for third parties to distribute interest ^[1]. Banking groups argue that yield-bearing stablecoins could drain deposits from traditional banks, while cryptocurrency firms contend that broad restrictions would stifle innovation and drive users to offshore platforms ^[2].

Privacy advocates have also raised alarms. Journalist L0la L33tz criticized the bill for potentially requiring service providers to use analysis tools to screen wallet addresses and block or reject payments based on "suspicious patterns" rather than only clear sanctions cases ^[1]. She further argued that the legislation could enable prosecution of developers for crimes committed by others, even with proposed protections for open-source developers ^[1].

Former SEC Chief Accountant Lynn Turner warned that the CLARITY Act draft lacks safeguards comparable to the Sarbanes-Oxley Act, including mandatory audited financial statements and robust Public Company Accounting Oversight Board oversight—deficiencies he suggested could enable another FTX-style collapse ^[2].

Additionally, Democratic members of the committee have continued pressing for stronger ethics provisions that would prevent senior government officials, including the president, from personally profiting from cryptocurrency ventures—provisions that have repeatedly stalled in White House negotiations ^[2].

Legislative Path Forward

The CLARITY Act, based on House-passed H.R. 3633, aims to establish a comprehensive federal framework dividing oversight between the SEC and CFTC, setting standards for payment stablecoins, clarifying decentralized finance rules, and protecting software developers who don't control customer funds ^[2].

Before reaching a full Senate vote, the bill must pass through both the Banking Committee and the Agriculture Committee, which shares jurisdiction over spot market oversight and CFTC matters ^[1][2]. The Agriculture Committee has scheduled its own markup for January 27, though it remains unclear whether the Banking delay will affect that timeline ^[1][2].

White House crypto czar David Sacks emphasized that "the White House remains committed to working with Chairman Scott, members of the Senate Banking Committee, and industry stakeholders to pass bipartisan crypto market structure legislation as soon as possible" ^[1]. He urged the cryptocurrency industry to use the pause to resolve remaining differences, stating that passage "is so nah wie nie zuvor" (closer than ever before) ^[1].

On prediction platform Polymarket, the probability that the CLARITY Act becomes law this year currently stands above 60% ^[1].