The U.S. digital asset market structure legislative outlook remains hazy at best as the White House appears to be losing patience with some crypto stakeholders’ all-or-nothing stance.
Last Friday saw token efforts to undo some of the damage caused by Coinbase’s (NASDAQ: COIN) abrupt withdrawal of support for the latest draft of the CLARITY Act. Coinbase CEO Brian Armstrong declared last Wednesday that he’d “rather have no bill than a bad bill,” although he appeared to define ‘bad’ as what’s bad for his company, not the entire crypto sector.
Armstrong later confirmed that his biggest concern remains new CLARITY language requiring exchanges to observe the GENIUS Act’s prohibition on stablecoin issuers offering yield/interest to token holders. A sizable percentage of Coinbase’s revenue relies on offering ‘rewards’ to users who passively hold stablecoins on its platform, which banks claim will spark mass ‘deposit flight’ by bank customers.
A call was quickly set up between crypto stakeholders and Senate Democrats to see if a new joint approach could be found (it’s unclear if the GOP held a similar confab). While some reports suggested the call was productive, others called it a ‘group therapy session’ in which ‘no real progress’ was made.
Some crypto stakeholders seemed far less bothered by Coinbase’s existential concerns and argued that CLARITY’s benefits outweighed its negatives. Some fear that reopening this debate will cause other stakeholders to make additional demands of their own, alongside similar threats to take their ball and go home if these demands aren’t met.
One social media maven dismissed Armstrong’s ‘banks want to prevent users from earning yield’ arguments, saying “parking capital on an exchange so they can lend it out and throw users a cut isn’t decentralization, it’s the same banking model with a crypto logo.” When Armstrong claimed not to understand this argument, the user told the CEO, “This wasn’t about [banks] stopping people from earning yield. It was about stopping you from being the one in the middle earning it.”
On Monday, Armstrong tweeted from the World Economic Forum (WEF) in Davos, where he said he planned to “continue the push for market structure legislation” as part of his “three main goals” for the week.
Back home, Senate Banking Committee chair Tim Scott (R-SC) has yet to reschedule the CLARITY markup session that was cancelled following Coinbase’s withdrawal of support. The Senate Agriculture Committee has yet to indicate whether this hiccup will delay progress on its version of CLARITY, the latest draft of which is scheduled to be released on Wednesday, January 21, ahead of its own markup session on January 27.
Speaking on an earnings call shortly after the CLARITY brouhaha kicked off, David Solomon, CEO of Wall Street fixtures Goldman Sachs (NASDAQ: GS), said it seems there’s “a long way to go before that bill is gonna progress.”
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White House not amused by Coinbase’s antics?
Among the more ominous reports of parties losing faith in the market structure process came from Crypto in America journo Eleanor Terrett, who on January 16 tweeted that the White House “is considering pulling its support for the crypto market structure bill entirely if @coinbase does not come back to the table with a yield agreement that satisfies the banks and gets everyone to a deal.”
Citing “a source close to the Trump administration,” Terrett said the White House was “furious with Coinbase’s ‘unilateral’ action on Wednesday, which it apparently was not notified of in advance, calling it a ‘rug pull’ against the White House and the rest of the industry.” Terrett’s source reminded her that CLARITY “is President Trump’s bill at the end of the day, not Brian Armstrong’s.”
Armstrong pushed back on this report, calling it “not accurate,” adding that the White House “has been super constructive here. They did ask us to see if we can go figure out a deal with the banks, which we’re currently working on.” Coinbase’s chief legal officer, Paul Grewal, added that the White House “has been clear and we’re feeling good about their lean in here.”
But Terrett called her reporting “airtight and accurate,” noting that Armstrong had basically confirmed that “the White House asked Coinbase to go secure a deal on yield” and that the White House’s future support “appears to be contingent on that outcome.”
Neither White House ‘AI & Crypto Czar’ David Sacks nor Patrick Witt, exec director of the President’s Council of Advisors for Digital Assets, have so far offered any direct comment on Terrett’s report. In the immediate aftermath of the Banking committee scrapping its markup session, Witt blamed Democrats while Sacks said the White House “remains committed” to working with stakeholders and legislators to pass CLARITY “as soon as possible.”
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Senate Judiciary Committee sticks its beak in
A further wrinkle in this fight arose late last week when Senate Judiciary Committee chair Chuck Grassley (R-IA) and ranking member Dick Durbin (D-IL) wrote a letter to Banking Chair Scott and ranking member Elizabeth Warren (D-MA) expressing “serious concerns” about CLARITY infringing on Judiciary’s turf.
Sent the day before Banking’s cancelled markup session, the letter says Judiciary “was not consulted or given the opportunity to meaningfully review the proposed changes” to the federal criminal code provision prohibiting unlicensed money transmitting businesses (MTB).
The letter claims Judiciary, not Banking, has jurisdiction over this section of the criminal code. As such, the Judiciary’s leaders expect that “material changes to this body of law would involve consultation with the committee of jurisdiction and the agencies it oversees.”
Specifically, a late addition to CLARITY would exempt developers of non-custodial decentralized finance (DeFi) platforms from these MTB rules. This addition, originally a standalone bill called the Blockchain Regulatory Certainty Act (BRCA), declared that “software developers and infrastructure providers who do not control user funds are not money transmitters under federal law.”
The Judiciary’s letter references crypto’s reputation for facilitating financial crime, citing the example of Tornado Cash, a non-custodial coin-mixing platform whose co-founder, Roman Storm, was convicted last August of conspiracy to operate an unlicensed MTB. The letter claims CLARITY’s DeFi language would have “seriously jeopardized the government’s case and likely precluded the government from bringing charges” against Storm.
As if on cue, January 18 saw blockchain security firm CertiK reveal that Tornado Cash is being used to launder some of the $282 million in BTC stolen via a January 10 compromise of a digital wallet. Some of the stolen BTC were bridged to the Ethereum network before being sent to Tornado Cash.
(The Thorchain bridging platform appeared to indirectly brag about their role in the laundering, claiming a ‘world record speedrun’ by the individuals transferring the BTC to Ethereum and other networks.)
Getting back to the letter, its authors say that CLARITY would “create a significant enforcement gap for decentralized digital asset platforms. Such a gap risks attracting illicit actors—like cartels and other sophisticated criminal organizations—to decentralized platforms. Criminals already use tactics to obscure unlawful transactions. This bill would make prosecuting this conduct even more difficult.”
The letter then theorizes that CLARITY’s changes “may also implicate fiat currency hawalas and allow non-digital asset [MTBs] that use new technologies, such as smart contracts, to argue that they are not subject to a money transmitting system.”
Again, as if on cue, India’s security agencies have begun sounding the alarm over the rise of ‘crypto hawala’ networks, a digital asset update of the informal cross-border money transfer systems. The said update is allegedly helping to fund militants in the disputed Jammu and Kashmir region bordering India and Pakistan, as well as facilitating smuggling, drug trafficking, and other illicit activities.
The letter closes by urging Banking’s leaders to “critically evaluate this [DeFi] provision and consider its damaging consequences.” However, Politico quoted a Scott spokesperson saying Banking’s chairman “appreciates the engagement” but insisted that the BRCA “falls squarely within” Banking’s jurisdiction.
If/when CLARITY makes it out of its committees to the Senate floor, it will require 60 votes for passage. Should Judiciary members feel like they’ve been sidelined without cause, it could create additional incentives for them to vote against CLARITY becoming law, at least, not without sufficient amendments ahead of that vote.
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Feds haven’t sold Samourai Wallet’s seized BTC
U.S. President Trump has yet to issue a rumored pardon for Keonne Rodriguez, the co-founder of the Samourai Wallet mixer, who was sentenced to five years in prison last November after pleading guilty to operating an unlicensed MTB.
However, White House crypto advisor Patrick Witt has weighed in on claims from earlier this month that the Department of Justice (DoJ) had sold some of the BTC tokens that were forfeited when Rodriguez and Samourai’s other co-founder, William Lonergan Hill (who’s serving four years), were arrested in April 2024.
Such a sale would contravene the executive order (14233) Trump issued last March establishing the nation’s Strategic Bitcoin Reserve (SBR). The order included a ban on the federal government selling any of the BTC in its possession, an edict later confirmed by Treasury Secretary Scott Bessent.
When reports of the DoJ selling first arose, Witt said he was “looking into this.” On January 16, Witt tweeted that the White House had “received confirmation from DOJ that the digital assets forfeited by Samourai Wallet have not been liquidated and will not be liquidated, per EO 14233. They will remain on the USG balance sheet as part of the SBR.”
In an interview last week with Crypto in America, Witt was asked about the status of the SBR. Witt said the SBR was “certainly still on the priority list” and indicated that “we’ve got a call later this afternoon on this.” However, Witt cautioned that “obscure legal provisions” were complicating some agencies’ ability to move more quickly “in a legally sound way.”
The crypto sector has long pressed the government to buy additional BTC on the open market and add these to the SBR. This would obviously help boost BTC’s fiat price, but there doesn’t yet appear to be the political will to stick taxpayers with the bill for pumping crypto bros’ bags. This has led to alternative proposals, such as revaluing America’s physical gold supply to create funds to buy more BTC.
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Trump to sue JPM over debanking
On January 17, Trump used his Truth Social platform to rebut a Wall Street Journal report that he’d asked JPMorgan (NASDAQ: JPM) CEO Jamie Dimon to replace Jerome Powell as the next chair of the U.S. Federal Reserve. But Trump went one better, declaring that “I’ll be suing JPMorgan Chase over the next two weeks for incorrectly and inappropriately DEBANKING me after the January 6th [2021] Protest.” (Insert your ‘two Trump weeks’ joke here.)
It’s unclear what precisely set Trump off regarding JPM/Dimon, but we are nearing the one-year anniversary of Trump’s 2025 video address to the WEF, in which he blasted both Dimon and Bank of America (BofA) (NASDAQ: BAC) CEO Brian Moynihan for allegedly debanking conservative individuals and groups.
This debanking was part of what many in the crypto community call Operation Choke Point 2.0, the alleged effort by Trump’s predecessor Joe Biden to push banks to deny services to individuals/entities engaged in questionable financial activities and/or people Biden didn’t like.
The debanking issue has since been rendered moot by the combination of Trump’s executive orders, the rescinding of ‘reputational’ concerns by U.S. federal agencies, and the banking sector’s growing embrace of all things crypto. (The Trump-linked DeFi project World Liberty Financial has even applied for a banking license.)
But old habits die hard, leading to last November’s opening of an investigation by Florida’s Attorney General into JPM’s 2024 debanking of Trump Media & Technology Group (TMTG) (NASDAQ: DJT) and its possible connection to political efforts targeting then-candidate Trump.
Earlier this month, the libertarian-focused Cato Institute issued a report claiming that most debanking occurs as a result of political pressure, not because bankers independently pick winners and losers. (A client is a client is a client.)
That matches Dimon’s December comments that his company doesn’t “debank people for religious or political affiliations … we debank people who are Republicans, Democrats, religious people,” but generally at the government’s ‘request.’
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NYSE going 24/7 thanks to blockchain
The New York Stock Exchange (NYSE) was closed Monday for Martin Luther King Day, but the NYSE used the downtime to announce plans to develop “a platform for trading and on-chain settlement of tokenized securities.”
There’s no timing on when this new platform might launch, but NYSE claims it will offer “24/7 operations, instant settlement, orders sized in dollar amounts, and stablecoin-based funding.” It will also “support multiple chains for settlement and custody,” assuming regulatory approvals are forthcoming.
Regulatory approvals probably won’t be hard to come by, given the ‘anything goes’ mentality currently gripping the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). In December, the SEC greenlit a tokenized securities trial by an offshoot of the Depository Trust and Clearing Corporation (DTCC).
Last September, both the CFTC and SEC declared that registered exchanges “are not prohibited from facilitating the trading of certain spot crypto asset products.” True to form, the NYSE says its new platform will not only support tokenized securities but also “tokens natively issued as digital securities.”
NYSE’s parent company Intercontinental Exchange, Inc. (NYSE: ICE), said its broader digital strategy includes “preparing its clearing infrastructure to support 24/7 trading and the potential integration of tokenized collateral.” ICE is working with BNY (NYSE: BK) and Citi (NYSE: C) to support tokenized deposits across ICE’s clearinghouses.
While many in the crypto sector hailed the NYSE announcement, others predicted this would be very bad news indeed for Coinbase, which plans to launch its own tokenized real-world assets trading platform this year. However, NYSE’s audience is significantly greater than Coinbase’s, and other rivals like Robinhood Markets (NASDAQ: HOOD) and Kraken have a head start in offering tokenized equities to non-U.S. customers.
While they await the necessary ‘regulatory clarity,’ Fortune reported that Coinbase has begun offering stock trades “in a conventional fashion” via Apex Fintech Solutions. These trades are currently available only to a few select users, but Coinbase plans to extend this option to other users in the coming weeks.
Coinbase’s Armstrong dismissed suggestions that Coinbase has started too late to become a serious equities player, stressing that “what we’ll be good at is being the bridge between traditional finance and crypto, and then getting tokenized equities to really take off.”
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Watch | Teranode & the Future of AI: Insights from Martin Coxall
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Source: https://coingeek.com/no-clarity-on-us-crypto-bill-as-coinbase-irks-white-house/
