How quickly can a promising piece of legislation fall apart in Washington? The Trump administration‘s support for a major crypto bill now hangs in the balance after Coinbase suddenly withdrew its backing just hours before a critical Senate vote. White House officials didn’t mince words, calling the company’s move a “rug pull” using crypto slang for an unexpected betrayal.
The drama centers on the CLARITY Act, which aims to establish clear rules for digital assets. The Senate Banking Committee rewrote the House-passed version, and Coinbase didn’t like what it saw. CEO Brian Armstrong raised red flags about provisions that could effectively ban tokenized stocks, restrict decentralized finance platforms, and limit the authority of the CFTC. The company’s chief legal officer Paul Grewal made clear they’d rather have no legislation than bad legislation. Many beginners are advised to start with small investments when exploring cryptocurrencies to manage risk and learn the market, such as buying fractional amounts of Bitcoin or Ethereum as a first step and using reputable exchanges to do so. fractional buying
Administration sources fired back quickly, emphasizing that “this is President Trump’s bill at the end of the day, not Brian Armstrong’s.” They viewed Coinbase’s withdrawal as a unilateral decision that ignored the broader industry’s interests. Now the White House says continued support depends on Coinbase returning to the negotiating table to hammer out an agreement that works for both crypto companies and traditional banks.
The contested provisions reveal deep tensions between old finance and new. Banks lobbied hard against allowing stablecoin holders to earn yields, fearing customers would pull deposits to chase better returns. The rewritten bill would eliminate these rewards, effectively helping banks suppress competition. Coinbase also objected to requirements that could expose user financial records and compromise privacy. Industry figures like Erik Voorhees and Nic Carter sided with Coinbase, criticizing banks’ influence as regulatory capture protecting incumbents.
Senate Banking Committee chair Tim Scott hasn’t rescheduled the cancelled markup session, leaving the bill’s timeline uncertain. Meanwhile, the Senate Agriculture Committee plans to release its version on January 21 with a markup scheduled for January 27. White House officials note the legislation is closer to passage than ever before, but getting there requires bipartisan cooperation across multiple committees. Senator Cynthia Lummis acknowledged frustration while stressing the importance of finalizing clear federal standards for digital asset markets.
The situation highlights how crypto’s promise of decentralization clashes with Washington’s reality of compromise and horse-trading.
