Written by: Changan, Core Contributor of Biteye
At the beginning of 2026, after five years of regulatory tug-of-war and hundreds of enforcement cases, the global cryptocurrency market's attention turned to Capitol Hill in Washington, D.C. A bill named CLARITY was intended to provide clarity for digital assets that had long been in a regulatory gray area, but at the last moment, it evolved into an ultimate game between the old and new financial orders.
On January 17, the White House announced it might reconsider its support, pushing the CLARITY Act into the spotlight.
Today, we open this hundreds-page bill, not to chew through legal clauses, but to explore: why did Coinbase, which once led the charge for regulation, "turn against" it at the last moment? As retail investors, how will these hundreds of pages of paper change your wallet?
01 Background: The End of the Law of the Jungle
Before the birth of the CLARITY Act, cryptocurrency regulation in the U.S. resembled a lawless land, with major players struggling amid chaos:
The Civil War of Dual Hegemony: Before CLARITY, the U.S. lacked a unified framework for crypto assets. The SEC wanted to regulate tokens as stocks, while the CFTC aimed to treat them as commodities. Projects caught in the middle never knew which agency would come knocking the next day.
The Fear of "Litigation as Regulation": Due to the lack of clear laws, the SEC chose a blunt approach: "sue first, regulate later." Ripple and Coinbase suffered greatly; for instance, the Ripple case has lasted over three years, directly affecting the market cap fluctuations of XRP by hundreds of billions of dollars and becoming a psychological shadow over the entire industry. This led to a significant outflow of talent and capital to places like Singapore and Europe.
The Anxiety of Traditional Banks: Stablecoins offer an average annual yield of 4.2%, far exceeding traditional bank savings rates, raising concerns about a potential monthly outflow of over $20 billion in deposits. To protect their "purses," banking lobbyists urgently needed a legal framework to rein in cryptocurrencies.
To end the chaos, this hundreds-page Clarity Act attempted to redefine market rules:
(1) Clear Management Entities: Assets that are sufficiently decentralized and no longer rely on a single issuer (like Bitcoin) would be regulated by the CFTC. Assets in early stages with clear financing attributes would be regulated by the SEC.
(2) Integration of Stablecoin Framework: "Licensed payment stablecoins" that meet the GENIUS Act criteria would be excluded from the definition of securities, with their trading use supervised by the CFTC/SEC, and issuance and reserve requirements referencing the GENIUS Act.
Ending regulatory infighting and providing the market with a "predictable future." This is why companies like Coinbase, Ripple, and Kraken initially publicly supported CLARITY.
Until the Senate version appeared.
02 The "Midnight Reversal" of the Bald Guy
The initial version of the CLARITY Act was meant to be clear, attempting to redefine rules through three pillars: asset classification, financing regulation, and stablecoin access. However, in the Senate's revised version in January 2026, the winds changed, and the terms became extremely harsh:
Tokenization Ban: The Senate draft included clauses that effectively restricted the direct tokenization of traditional financial assets (like U.S. stocks and bonds) on public chains.
RWA Exclusion: The bill explicitly excluded RWAs from digital commodities, meaning they would be subject to extremely strict and inflexible securities law regulation, potentially preventing them from being listed on CEXs.
This revision sparked intense discussions within the industry, with Coinbase CEO Brian publicly withdrawing support for the bill, stating that the revised bill was worse than having no bill at all. The core points of opposition were mainly three:
Choking Stablecoin Rewards (the most direct conflict of interest): Coinbase partnered with Circle, allowing users holding USDC to earn about 3.5% rewards. This contributed significantly to Coinbase's revenue. Banking lobbyists pushed hard for this clause, fearing depositors would move funds from banks to interest-earning stablecoins.
A Ban on Tokenization of U.S. Stocks and RWA: Coinbase has always been optimistic about tokenization, believing it to be the future of finance. The new bill, through complex registration requirements, effectively prohibited the free trading of tokenized stocks on crypto infrastructure.
The End of DeFi: The bill requires almost all DeFi protocols to register like banks or brokers, granting the government high access to DeFi transaction data. Brian Armstrong believes this infringes on user privacy and is technically unfeasible.
03 How Will the Bill Affect Us?
The same bill presents entirely different scenarios for different market participants.
Retail Investors: A Double-Edged Sword
Pros: The bill mandates that CEXs must isolate customer funds and use third-party custodians, fundamentally preventing tragedies like FTX.
Cons: Due to the 2026 amendments protecting banks, retail investors may lose 3% to 5% of interest on CEX-held stablecoins, and with RWA restrictions, the vision of ordinary people purchasing fractional shares (like 0.01 shares of Tesla) on-chain may vanish. Of course, this depends on whether the assets and CEXs are subject to the bill's jurisdiction.
Institutions: Compliance Windfall
For institutions, this feels more like a long-awaited compliance ticket. Legal certainty is a prerequisite for giants like Goldman Sachs and BlackRock to enter the market. Once the jurisdictional boundaries of the SEC and CFTC are clarified, billions of dollars in institutional funds will be allocated compliantly to digital commodities beyond Bitcoin and Ethereum, inevitably triggering a wave of applications for altcoin spot ETFs.
Projects: Some Happy, Some Sad
Projects defined as digital commodities will be free from the SEC's entanglement; those defined as securities will face extremely heavy compliance reporting obligations and financing restrictions.
Additionally, the bill mandates a lock-up period for core team tokens, effectively curbing the bad habit of dumping at launch.
Fortunately, the bill clearly protects non-custodial developers. If you only write code and publish open-source protocols without touching customer funds, you will not be considered a Money Transmitter, protecting pure technical innovation at the protocol level.
04 Industry Debate: Consensus or Division?
Biteye has summarized the positions of industry KOLs and projects regarding the latest revised bill.
AB Kuai.Dong @_FORAB (XHunt Ranking: 1087)
Viewpoint: Reports on Coinbase's sudden reversal, believing the latest version of the bill is friendly to traditional banks but detrimental to crypto-native companies. Specific points of opposition include limiting stablecoin rewards, increasing costs for stock tokenization, and expanding government oversight of DeFi, which could stifle innovation.
qinbafrank @qinbafrank (XHunt Ranking: 1533)
Viewpoint: Points out that the Senate Banking Committee canceled its review due to Coinbase's opposition, which may lead to a market correction. Focus of opposition includes the "actual ban" on tokenized equity, invasion of DeFi privacy, weakening CFTC power, and the cancellation of stablecoin reward mechanisms, believing this will allow the SEC to dominate and suppress innovation.
Phyrex@Phyrex_Ni (XHunt Ranking: 765)
Viewpoint: Analyzes the reasons behind Coinbase CEO's obstruction of the bill, including restrictions on tokenized stocks, functional regulation of DeFi, SEC power boundary issues, and the prohibition of interest on stablecoins, along with ethical conflicts involving the Trump family.
PANews@PANews (XHunt Ranking: 1827)
Viewpoint: Believes that if the proposal is delayed, it will become increasingly unfavorable. January is one of the few available structural legislative windows for the Senate; if substantial progress is not made, it could easily be "naturally squeezed out" of the overall legislative agenda. Additionally, if the Democrats gain an advantage in the midterm elections, the probability of passage will be lower.
Chen JianJason @jason_chen998 (XHunt Ranking: 1082)
Viewpoint: Believes the conflict is fundamentally driven by interests, such as Coinbase's public opposition stemming from the current version's prohibition on earning interest on stablecoins, which would directly lead to a loss of $1 billion in annual revenue and a significant user exodus, while Ripple's CEO strongly supports the advancement of the CLARITY Act, as the prohibition on stablecoin interest does not significantly impact Ripple.
Bitcoin Orange @chengzi_95330 (XHunt Ranking: 3508)
Viewpoint: Points out that although the current proposal is imperfect, a16z, Circle, Kraken, and others are willing to continue pushing forward, fearing that if they "flip the table" now, the legislative window may close entirely; while Coinbase believes that if they cannot address core issues like stablecoin yields in such a crypto-friendly political environment, there will be no opportunity in future, more anti-crypto political cycles, hence they are making a "historical judgment bet."
Brad Garlinghouse (Ripple CEO)
@bgarlinghouse (XHunt Ranking: 1870)
Viewpoint: Surprised by Coinbase's strong opposition, believes Brian's concerns are reasonable but emphasizes that "the rest of the industry is still constructively supporting and working to resolve issues." Garlinghouse states that Ripple is ready to advance under a compliance framework (like XRPL tokenization), viewing the bill as a step forward and unwilling to abandon the overall process due to disagreements.
Vlad Tenev (Robinhood CEO) @vladtenev (XHunt Ranking: 380)
Viewpoint: Supports progress. He reiterates Robinhood's support for Congress to pass the market structure bill, acknowledging that there is still work to be done (such as addressing staking restrictions in certain states and the availability of stock tokenization), but sees a clear path and is willing to assist the Senate Banking Committee in completing it. He emphasizes that the U.S. needs to lead crypto policy to unlock innovation and protect consumers.
Arjun Sethi (Kraken co-CEO) @arjunsethi (XHunt Ranking: 1941)
Viewpoint: Strongly supportive. He states that Kraken is fully committed to supporting Tim Scott and Cynthia Lummis's efforts, criticizing that "walking away or declaring failure" is easy, but what truly matters is "continuing to show up, solve problems, and build consensus." He warns that if they give up, it will exacerbate uncertainty and push innovation overseas.
05 Retail Investors' Risk Management and Gold Mining: 2026 Action Guide
A coming-of-age ceremony, a new beginning.
Looking at the entire process of the CLARITY Act's negotiation, it is essentially a "coming-of-age ceremony" for the cryptocurrency industry. It marks the official leap of cryptocurrencies from the margins to the main stage of global finance.
The "clarity" of regulation itself is the biggest infrastructure. For retail investors, understanding and adapting to these new rules is key to defending and growing assets in the coming years.
Here are three realistic and actionable strategies compiled by Biteye for you.
1. Reassess Your Portfolio, Lean Towards "Digital Commodities"
For cryptocurrency holdings, consider increasing the allocation weight of assets clearly classified as "digital commodities" (such as Bitcoin, Ethereum, etc.) and mature blue-chip tokens within their ecosystems. These assets will be the first to attract large-scale compliant capital inflows from traditional institutions as regulatory uncertainties are eliminated, and products like spot ETFs are more likely to be approved, thus forming strong price support. Conversely, be extremely cautious with newly issued tokens that are likely to be classified as "securities," as they will face stringent disclosure and financing restrictions, and liquidity may dry up.
2. Reconfigure Stablecoin Strategy, Seek Yield Alternatives
If users are in regions governed by Clarity (such as the U.S.), the bill may limit CEXs (like Coinbase, Circle) from offering 3% to 5% stablecoin rewards. If the bill is officially implemented and compliant exchanges' interest rates drop to zero, consider transferring funds to non-custodial on-chain DeFi protocols. Although the bill strengthens regulation on DeFi, as long as the protocol itself has censorship resistance, its native yields may become a safe haven.
3. Approach the RWA Sector with Caution, Beware of Liquidity Traps
Given the Senate's extremely harsh stance on RWAs (real-world assets), which may even prohibit their listing on CEXs, if you currently hold a large amount of tokenized U.S. stocks or bonds, be wary of the risk of liquidity drying up. Additionally, before the dust settles on the bill, do not blindly participate in tokenized traditional financial products that require high compliance and real-name verification (KYC), as these products are most likely to be forced to shut down due to policy changes.
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