The CLARITY Act, which aims to classify digital assets (with a crypto focus) and divide oversight between the SEC and the CFTC, is delayed further as Coinbase CEO withdraws support for the bill.
The Digital Asset Market Clarity bill has been under consideration by the Senate Banking Committee. The bill seeks to bring structure and regulation to the crypto sector and provide legal protection to blockchain developers. Analysts see the delay as in favour of banks and as a blow to crypto exchanges.
Criticism of CLARITY and Coinbase’s Pullback
One of the major criticisms against the Act is that it shifts power from the CFTC to the SEC. Crypto exchanges see the CFTC as more innovation-friendly, as it treats crypto assets like digital commodities. On the other hand, the SEC treats tokens and tokenized equities as “securities,” which invites tighter regimes that kill innovation and thereby expansion plans of exchanges like Coinbase.
Coinbase CEO Brian Armstrong took to Twitter yesterday, where he explained how CLARITY is worse than the current status quo. He said that the Act is in fact a “de facto ban on tokenized equities.” He also raised privacy concerns about how the Act provides the government “unlimited access to your financial records”.
Another major flaw he identifies is how the amendment blocks crypto exchanges from giving rewards to users for holding crypto. Coinbase currently pays 3.5% “rewards” for some Coinbase One balances, and they plan to expand this “reward” as a core part of their business model to attract more customers. But CLARITY coming into effect can sharply limit their options.
His views reflect the sentiment shared by many other critics regarding the proposed legislative reforms. The core of the criticism remains how the Act gives too much power to the SEC over the crypto sector.
How the Crypto Bill and Its Delay End Up Helping Banks
Many view the bill as pro-bank since it makes stablecoin rewards extremely hard to execute in the U.S. market. In effect, crypto platforms will not be able to pay interest to users on stablecoins in their accounts. This makes stablecoins less attractive as they will not be perceived as high-yield savings. Thus, the act works as a de facto ban on crypto platforms from directly competing with banks.
Tokenized equities allow users to buy slices of high-priced stocks as on-chain tokens. Moreover, investors will also be able to trade 24/7 with near-instant settlement instead of waiting for market hours. In short, tokenized equities are cheaper, faster, and more convenient than traditional equity trading offered by banks.
Tokenized equities could eat into the market share of banks, as trading them does not require traditional money and bank infrastructure. Banks would also be forced to lower the fees they charge for buying, holding, and selling equities. CLARITY brings in the SEC to deal with tokenized equities, effectively dampening all these advantages.
The delay in the Act will keep the crypto sector in limbo, which also favors banks, as it prevents crypto platforms from achieving an equal level of legitimacy that traditional financial institutions offer.
What is the CLARITY Act?
The CLARITY Act or the Digital Asset Market Act of 2025 was introduced in May, 2025. The bill aims to provide a comprehensive legal framework for cryptocurrencies, associated assets, and transactions. It draws clear lines between the SEC’s and the CFTC’s regulatory powers over digital assets like bitcoin and tokenized equities.
In short, the act brings about clarity and structure to the U.S. crypto market. While the CLARITY Act structures the market, another standalone bill, BRAC or the Blockchain Regulatory Certainty Act, provides legal protection to developers and non-custodial actors within the crypto sector. Together, these legislative reforms aim to distinguish and define crypto from the banking sector, easing regulatory scrutiny and encouraging innovation.
