Legislative Efforts Intensify for U.S. Digital Asset Clarity

The landscape for digital asset regulation in the United States is poised for significant shifts as Coinbase CEO Brian Armstrong actively lobbies in Washington, D.C., for the passage of the Digital Asset Market Clarity Act of 2025 (CLARITY Act). Armstrong has expressed optimism regarding the bill's prospects, suggesting a strong chance for its enactment following discussions with lawmakers. This legislative push seeks to establish a clearer regulatory framework for the rapidly evolving cryptocurrency sector, impacting major industry players and broader market dynamics.

The CLARITY Act: Delineating Regulatory Oversight

The CLARITY Act, which notably passed the U.S. House of Representatives on July 17, 2025, with bipartisan support, is currently under consideration by the Senate Banking Committee. This legislation aims to resolve the persistent issue of "regulation by enforcement" by defining clear jurisdictional boundaries for digital assets between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The Act categorizes digital assets into three primary types:

  • Digital Commodities: Defined as assets intrinsically linked to a blockchain system, whose value is derived from its use or functionality. The CFTC is granted exclusive regulatory jurisdiction over these, including oversight of Digital Commodity Exchanges (DCEs), Brokers (DCBs), and Dealers (DCDs).
  • Investment Contract Assets: These are digital commodities offered or sold as part of an investment contract, typically falling under SEC jurisdiction. The Act provides a limited exemption from SEC registration for fundraising involving digital commodities on 'mature blockchains,' with specific disclosure requirements for issuers.
  • Permitted Payment Stablecoins: In conjunction with the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act), these are generally excluded from securities laws, placing their trading activities under CFTC jurisdiction, while prudential oversight remains separate.

This framework contrasts with alternative proposals such as the Responsible Financial Innovation Act of 2025 (RFIA) discussion draft from the Senate Banking Committee, which grants the SEC primary authority over 'ancillary assets,' reflecting a potentially more coordinated approach.

Industry Reaction and Lobbying Efforts on Stablecoin Yields

The legislative developments are not without contention, particularly concerning stablecoins. U.S. banking lobbies are actively campaigning against allowing stablecoin issuers to earn yield, warning lawmakers that such programs could drain traditional bank deposits and destabilize lending. An August letter to the Senate Banking Committee from over 40 state banking associations, supported by the American Bankers Association, urged for an extended ban on interest payments, even for exchanges and affiliates, beyond what was initially outlined in the GENIUS Act. They argue stablecoins should remain payment mechanisms, not stores of value.

However, stablecoin advocates, including Coinbase, challenge this narrative. Faryar Shirzad, Coinbase's chief policy officer, argued in September 2025 that the "deposit erosion" threat is overstated, pointing out that banks hold substantial reserves at the Federal Reserve, earning significant risk-free interest, rather than competing for deposits with higher rates.

"If banks were truly starved for deposits, they would be competing aggressively for funds with higher interest rates. Instead, currently, they park $3.3T as reserves at the Federal Reserve, accounting for almost 20% of all bank deposits, rather than extending more loans. These reserves earned risk-free interest of $176B last year, or 55% of all bank earnings before taxes."

This suggests the banking lobby's push is more about "narrative control and protecting profit margins from competition" rather than genuine economic necessity, particularly given the estimated $187 billion annual profit banks derive from payment processing fees.

Market Implications and Investor Sentiment

The ongoing pursuit of regulatory clarity contributes to an overall market sentiment ranging from uncertain to bullish for the digital asset sector. The anticipation of a defined legal framework is viewed by many as a prerequisite for fostering innovation, enhancing market stability, and encouraging broader institutional adoption in the U.S. Bullish market data, including rising crypto futures open interest and a stablecoin market expanding to nearly $290 billion in 2025, underscores significant market potential that could be unlocked by favorable regulation.

The Bitwise Stablecoin & Tokenization ETF, filed with the SEC, exemplifies this growing institutional interest. Its dual-sleeve structure aims to capitalize on both stablecoin infrastructure and tokenized real-world assets, highlighting a strategy to hedge against crypto volatility while tapping into broader blockchain growth.

Coinbase's Strategic Position Amidst Regulatory Battles

For Coinbase, the leading U.S. crypto exchange, these legislative efforts are paramount to its long-term strategy and operational stability. The company's proactive lobbying underscores its recognition that regulatory outcomes will directly influence its business model. Coinbase has faced protracted litigation with the SEC regarding the classification of digital assets as securities, with the SEC's refusal to clarify its stance forcing the exchange into ongoing legal battles. While a March 2025 dismissal of an SEC lawsuit against Coinbase briefly led to a 4.94% rise in its stock, the broader uncertainty persists.

Financially, Coinbase reported Q1 2025 revenue of $2.0 billion, slightly below analyst expectations, primarily due to lower take rates influenced by rebates aimed at growing derivatives trading market share. Adjusted EBITDA for the quarter stood at $929 million, also falling short of the estimated $969 million. The company's profitability remains sensitive to interest rates and Bitcoin price volatility, while the regulatory status of smaller-cap tokens continues to pose challenges for institutional allocations.

Looking Ahead: A Pivotal Juncture for U.S. Crypto Policy

The coming weeks and months will be critical as the CLARITY Act progresses through the Senate. The outcome of these legislative debates will determine the trajectory of digital asset innovation and adoption in the United States. Key factors to watch include the Senate Banking Committee's deliberations, the ultimate reconciliation of differing regulatory philosophies between the SEC and CFTC, and the ongoing lobbying efforts from both traditional financial institutions and crypto advocates. A clear, supportive regulatory environment could solidify the U.S. position as a leader in the global digital asset economy, driving further market growth and institutional investment. Conversely, protracted uncertainty or unfavorable legislation could stifle domestic innovation and encourage businesses to seek more hospitable jurisdictions.