On January 27, 2026, Eastern Standard Time, three key threads of the U.S. crypto regulatory debate surrounding yield disputes emerged simultaneously: on one side, the SEC's cryptocurrency working group launched a multi-city tour, announcing its intention to "listen to market voices" through actual research; on the other side, the Senate Banking Committee pressed pause on legislative reviews due to disagreements over the regulatory boundaries of DeFi and yield terms; meanwhile, Coinbase CEO Brian Armstrong openly criticized the U.S. approach to yield restrictions. These three forces intertwined, clearly locking the focus of the controversy on one point—an acute conflict is forming between the cautious demand for yield security and the need to maintain the U.S.'s global competitiveness in crypto dollar assets. At this sensitive moment, market prices reacted swiftly: according to single-source data, BTC fell 1.08% to about $91,900, ETH dropped 2.05%, the RWA sector led the decline at 2.99%, while SocialFi slightly rose by 0.58%, with the differentiation among various assets and sectors amplified as an immediate reflection of regulatory uncertainty.
The Regulatory Wheel Keeps Turning, but Congress Hits the Brakes
From the timeline of institutional operations, the U.S. is exhibiting a typical pattern of "disjointed advancement" in shaping crypto rules. The Senate Banking Committee originally hoped to define the regulatory boundaries of DeFi through a comprehensive legislative framework and set clearer constraints on yield products, but disagreements quickly escalated regarding how to define the responsibilities of decentralized financial entities, yield caps, and interest rate spreads, directly delaying the progress of the bill. As a result, the legislative review has been put on hold, and the path that should have provided a top-level framework is unlikely to yield clear answers in the short term.
In stark contrast, the executive regulatory side did not wait for Congress to "make a decision." The SEC's cryptocurrency working group launched its multi-city tour as planned on January 27, attempting to collect industry feedback and public opinions through face-to-face research and discussions. This proactive approach effectively allows regulatory practice to continue moving forward while the legislative process is stalled, exploring feasible boundaries from an enforcement perspective. In terms of role division, Congress is responsible for the framework, while the SEC handles enforcement and details; however, these two lines, which should be coordinated, are now completely out of sync.
This rhythm dislocation has further torn apart industry expectations for future rules. On one hand, project teams and institutions know that the legislative deadlock means any existing or newly implemented regulatory tools could be reshaped by new laws in the coming years; on the other hand, the information released from the tour and working group research will, in turn, affect the speed and scale of enforcement. The result is that companies find it challenging to conduct medium- to long-term compliance planning when designing products, especially yield-bearing products: it is unclear whether they will face a more "securitized" determination or a more "bank deposit-like" constraint in the future, nor do they know if the current communication results with the SEC will be nullified after a new bill is passed. This institutional dislocation amplifies uncertainty, forcing the industry to constantly weigh compliance costs against innovation pace.
Armstrong Fires Back: Regulatory Metaphors and Competitiveness Anxiety
In this tug-of-war, Armstrong chose to step into the spotlight. In his public remarks, he emphasized that restrictions on yield "will not change the overall loan market, but will significantly impact the competitiveness of U.S. stablecoins globally." The core logic of this statement is to view yield as a fundamental function of on-chain dollar assets participating in global capital allocation rather than an "extra indulgence": even if the U.S. blocks the yield space of compliant channels, global capital will still find yield exposure through other jurisdictions and product forms, and the U.S. can only passively lose market share without truly reducing the risk leverage level globally.
To strengthen the impact of this assertion, Armstrong even likened strict regulatory proposals to "similar to China's restrictive policies." This analogy is clearly not just a technical comment but carries strong political connotations and public opinion guidance: in the U.S. context, equating a policy with a "highly administratively controlled" model serves as a reminder to decision-makers to pay attention to domestic political discourse and international image risks. This expression aims to elevate the technical yield cap dispute to a "institutional competitiveness" issue, thereby forcing regulators to reassess the costs from the perspective of international financial discourse power.
From Coinbase's business perspective, the yield cap is seen as a self-imposed constraint on the international status of dollar-denominated crypto assets, stemming from its systematic understanding of the ecosystem: yield is a crucial incentive for attracting overseas funds to hold and use dollar-denominated on-chain assets. If the U.S. compresses the yield space of compliant channels to nearly imperceptible levels or imposes hard caps, then dollar-pegged on-chain assets will inherently be at a disadvantage when competing with other denominated units and products from other jurisdictions. For leading platforms focused on custody, trading, and compliance products, this means not only a compression of revenue space but, more critically, the active weakening of the ecological "moat" built around compliant dollar assets. Of course, it is important to emphasize that Armstrong's statements represent the public stance and interests of a leading exchange, not established regulatory facts. When interpreting such "fireback" remarks, it is still necessary to maintain a clear distinction from formal policy texts and regulatory practices to avoid misreading emotional discourse as a predetermined direction.
Seeing the Trees but Not the Forest: The On-Chain Landscape of Dollar Yields
If we use Armstrong's criticism as a more macro translation, it can be said that current U.S. regulation largely "sees the trees but not the forest." From a regulatory perspective, yield products are primarily viewed as sources of risk for individual tools, requiring assessments of principal safety, sources of interest rate spreads, leverage nesting, and other specific issues, thus naturally leaning towards suppressing potential risks through limits, permits, or quota management. However, from the industry's standpoint, what matters more is the strategic position of the entire dollar crypto ecosystem within the global on-chain financial landscape: yield is just one of many functions but is a key interface for maintaining capital stickiness and usage depth.
From the perspective of policy economics, strong restrictions on yield will not only affect the attractiveness of a specific product but will also have a chain reaction on the discourse power of dollar-denominated assets in on-chain finance. When on-chain funds migrate between different assets, the comprehensive evaluation of "yield + safety expectations" determines which denomination will become the de facto settlement and storage hub. If the U.S., out of prudential considerations, compresses the yield space of compliant dollar assets to nearly indistinguishable low levels while other jurisdictions allow for more market-oriented yield formation mechanisms, then over the long term, some funds may gradually shift towards other pegged targets or diversified denominated units, weakening the dollar's central position in the new generation of on-chain financial systems.
This raises a sensitive question: if the U.S. excessively tightens yield regulation, does it mean yielding the runway to other jurisdictions and pegged assets? Logically, such a substitution effect exists, but what is currently easier to quantify are some surface indicators, such as the market capitalization share of dollar-pegged on-chain assets, the share of dollar-denominated channels in cross-border settlements, or the growth rate of crypto dollar products issued under different jurisdictional licenses. As for longer-term impacts, such as whether the dollar's dominance in the new generation of global financial networks will be structurally diluted, there is still a lack of sufficient data and case support. Attributing all structural risks to a single yield term is clearly exaggerated. In discussing potential migration and substitution, a more prudent approach is to acknowledge the existence of directional risks while emphasizing that real structural changes often require years of policy and market behavior accumulation, rather than being settled by one or two rounds of regulatory disputes.
Prices Respond First: The Regulatory Amplifier in a Down Market
During this window of escalating regulatory disputes, market price movements once again became a barometer of sentiment. According to data disclosed by a single source, in the context of an overall weak market, BTC fell 1.08% to about $91,900, and ETH dropped 2.05%, with mainstream assets facing pressure simultaneously. At the sector level, the RWA sector led the decline at 2.99%, while SocialFi slightly rose by 0.58%, showing a clear structural differentiation.
In an already downward-trending environment, noise surrounding yield regulation often amplifies volatility. Prices are originally suppressed by macro sentiment and liquidity expectations, and the increase in policy uncertainty provides additional narrative ammunition for bears. In such a fragile market condition, even if no substantial landing terms have emerged, as long as regulatory discussions focus on sensitive terms like yield, the market is likely to amplify short-term selling pressure and risk aversion in the interplay of news and rumors, forming a typical scenario of mainstream coins leading the decline and accelerated sector rotation.
Interestingly, the performance of the RWA sector shows an inverse relationship with regulatory clues. Common sense suggests that the RWA concept, closely related to "compliance" and "asset on-chain," should have a better chance of gaining a premium when regulatory paths are clear. However, in the current context of heightened regulatory uncertainty, RWA has become one of the leading declining sectors. This divergence can be understood as a market repricing of the "compliance narrative": when regulatory boundaries are unclear, any track deeply intertwined with real assets and traditional finance and regulatory institutions is viewed as a more direct exposure to policy risk in the short term, prompting funds to reduce positions to avoid potential gray rhinos.
In contrast, the SocialFi sector recorded a slight increase of about 0.58% during the same time window, exhibiting a mild counter-trend characteristic. This counter-movement does not necessarily indicate a fundamental reversal in the underlying conditions but may reflect a combination of short-term speculation and risk aversion preferences: some funds, when mainstream assets and "regulatory-sensitive tracks" are under pressure, shift towards relatively marginal sectors with stronger narrative drives to seek short-term elasticity. In other words, the strength of SocialFi in the current context appears more as a migration of sentiment and risk preference rather than a systemic endorsement of its long-term value.
From Courts to Congress: The Multi-Center Game of U.S. Crypto Regulation
The controversy surrounding yield is not the only site of contradiction within the U.S. regulatory system. At the judicial level, a series of cases represented by the Baton Corp lawsuit related to the Solana ecosystem show that the court system's attention to the legal attributes and behavioral boundaries of crypto assets is continuously rising. The details of the case itself are not the focus of this article, but its symbolic significance lies in the fact that even amid legislative stagnation and regulatory path oscillation, judicial processes continue to carve out the de facto industry boundaries through individual case rulings, adding new reference points and uncertainties for future compliance paths.
If we analyze the current situation from a higher dimension, we can see at least three parallel and interwoven threads: the first is the legislative attempts at the congressional level, trying to set a unified framework for DeFi, yield products, and crypto assets through one or several laws; the second is the executive regulatory agencies, represented by the SEC's cryptocurrency working group, actively "filling in the blanks" through guidance, tours, and enforcement practices in legally ambiguous areas; the third is the judicial system, which, through the adjudication of cases like Baton Corp, interprets and extends the applicability of existing legal provisions in the crypto context. The participants, motivations, and rhythms of these three lines are distinctly different, collectively forming a typical "multi-center game" pattern rather than a linear evolution of a single regulatory approach.
For project teams and exchanges, the increasing difficulty of strategy stems precisely from this multi-center game. Legislation may take years to reach a conclusion, but individual case rulings can change the compliance status of a certain type of token or yield product at any time; the friendly signals released by the regulatory working group during today's tour may face public pressure from another lawsuit tomorrow, forcing them to tighten up; the differences in positions among various agencies make "compliance" no longer a definitive state, but rather a dynamic process that is continuously reconstructed along the timeline based on case law, regulations, and the political atmosphere. This uncertainty compels institutions to adopt a more conservative approach in their business layouts, with many plans that could have expanded across borders and product lines having to be dismantled into more decentralized, short-term, and defensive attempts in the absence of unified guidance.
Will the Yield Dispute Push Assets Elsewhere?
Returning to the origin of the yield dispute, it is clear that the core contradiction remains unchanged: on one side, regulators, based on safety demands for financial stability and investor protection, hope to prevent new sources of systemic risk from emerging on-chain through yield restrictions and stricter entity identifications; on the other side, the industry harbors long-term concerns about the international competitiveness of dollar-denominated crypto assets, believing that excessive tightening equates to actively weakening the U.S.'s position in the new generation of global financial networks. The yield dispute is merely a surface expression of this tug-of-war, behind which lies a continuous game of balancing "risk—innovation—dominance."
Looking ahead, the SEC's tour launched on January 27 will largely determine the extent to which regulatory agencies can absorb industry feedback; whether the Senate Banking Committee can narrow the differences on the issues of DeFi boundaries and yield terms will also affect the future emergence of a relatively unified legal framework. Possible paths include: opening exemption channels for specific compliant products while maintaining the overall tone of yield restrictions; replacing rigid yield caps with clearer information disclosure and risk grading mechanisms; or gradually forming a de facto "soft framework" through the interaction of judicial and regulatory practices. However, in the absence of conclusive evidence, any judgments about the future being "significantly relaxed" or "fully tightened" are mere speculation and should not be regarded as a reliable baseline.
As the regulatory game has yet to take shape, a more feasible approach for investors is to shift their attention from single price fluctuations to several key progress nodes: including whether the Senate-related bill review resumes, whether the SEC will issue new guiding documents after the tour, and whether judicial cases like Baton Corp provide new definitions regarding asset attributes or yield products in their rulings. These signals are more reflective of the long-term direction of the institutional environment than daily price movements. Over a longer period, if the U.S. fails to form a clear and stable framework on yield issues and broader crypto regulation, global innovation and capital are likely to continue gravitating towards jurisdictions with clearer rules and more stable expectations through a "trial and error + migration" approach. By then, the yield dispute may bring not just fluctuations in a single sector, but potentially a geographical reconstruction of the entire value and liquidity chain.
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