CLARITY Act Fails in Senate Amid Stablecoin Rewards Dispute

The CLARITY Act, aimed at providing a unified federal regulatory framework for the US crypto industry, failed in the Senate after months of negotiations. One key issue that contributed to its demise was the dispute over stablecoin rewards. According to The Wall Street Journal, Coinbase CEO Brian Armstrong left Senator Angela Alsobrooks a voicemail in January, objecting to provisions restricting rewards paid on stablecoin holdings.

The banking industry had been pushing for tighter limits, arguing that yield on digital dollars could encourage deposit outflows from traditional banks. However, the issue also had commercial implications for Coinbase, which earns revenue through its relationship with USDC issuer Circle and offers users rewards on USDC balances.

A 15-page compromise was revealed in late June, showing just how deep the divisions had become. Armstrong objected to some of the provisions, leading Republicans to set aside several proposals that Coinbase did not support. The episode added to frustration among negotiators, but it does not show that a broader agreement was already within reach or that Coinbase alone was responsible for derailing the bill.

The talks became increasingly difficult as the number of disputed provisions and interested parties expanded. Ethics restrictions for public officials also became a major obstacle, with Democrats pushing more strongly for provisions limiting digital-asset holdings by senior government officials and members of their families.