White House Threatens to Abandon Clarity Act After Coinbase ‘Rug Pull’
– Source says Trump White House may pull support for landmark crypto bill after Coinbase’s last-minute revolt
– Clash over stablecoin yields and DeFi rules exposes deep rift between banks, regulators, and the crypto industry
The White House is weighing whether to walk away from the Clarity Act, a flagship crypto market-structure bill, after Coinbase abruptly broke with the administration over proposed limits on stablecoin yield and DeFi activity, according to a person described as close to the Trump team.
The move, first reported by Fox Business journalist Eleanor Terrett on X, threatens to derail what many in Washington and on Wall Street had seen as the best chance in years to get clear rules of the road for digital assets like bitcoin and ether.
“This is President Trump’s bill at the end of the day, not Brian Armstrong’s,”
the source told Terrett, referring to the Coinbase chief executive.
A Sudden Split Over Yield and DeFi
The rupture centers on a dense but pivotal set of provisions buried in the current Clarity Act draft.
Banking groups pushed hard for language that would effectively wall off interest-like “yield” on stablecoins, warning that easy on-chain returns could siphon deposits from traditional banks and weaken their ability to lend to households and small businesses.
Coinbase has taken the opposite view, arguing that treating stablecoin rewards like bank deposits would lock in the status quo. Executives have warned that tight limits would push users to offshore platforms and leave U.S. venues at a disadvantage just as Europe and parts of Asia move ahead with their own crypto frameworks.
Armstrong also railed against what he sees as de facto bans on tokenized equities and “certain prohibitions” on DeFi, saying the bill would entrench incumbents and shut out open protocols. He has complained that the structure would tip more authority toward the Securities and Exchange Commission at the expense of the Commodity Futures Trading Commission.
Inside Coinbase, the choice has been framed in stark terms: better to have no bill than to live with what they see as a bad one.
‘Rug Pull’ Against the White House
The stance—and the timing—have infuriated the West Wing.
According to Terrett’s reporting, White House officials viewed Coinbase’s decision to publicly walk away from the Clarity Act just before a key Senate Banking Committee markup as a “unilateral” and “unexpected” move that blindsided allies across the industry.
The source described it as a “rug pull” against both the administration and other crypto players who had stuck with the compromise.
From the administration’s perspective, the White House had already irritated parts of the banking sector by negotiating a deal that allowed some form of stablecoin yield to survive. The expectation, this person suggested, was that leading crypto firms would hold the line—at least through markup.
Instead, Armstrong went public, calling the draft structurally flawed and urging lawmakers to go back to the drawing board.
A Pivotal Bill Suddenly on Ice
The political fallout was immediate. The Senate Banking Committee, which had been preparing to mark up the Clarity Act, shelved the session after Coinbase’s broadside. Lawmakers now talk vaguely about rescheduling “in the coming months,” with no firm date.
The bill is not a minor vehicle. It is designed to split oversight between the SEC and CFTC, assigning different classes of digital assets to different regulators and, in theory, ending a years-long turf war that has left startups and institutional investors guessing.
For large asset managers and banks, that kind of clarity is not an abstract concern. It is a gating factor for launching new products.
Without clear jurisdictional lines, rolling out tokenized funds, derivatives on cryptoassets, or expanded spot ETFs remains a legal minefield. Compliance teams tend to respond the same way: they say no.
Meanwhile, overseas competitors are moving ahead under regimes that, while often strict, at least exist. Industry lawyers warn that each additional year of U.S. delay nudges more liquidity, talent, and innovation toward jurisdictions like the European Union and Singapore.
Industry Turns on Coinbase—But Not in Unison
On Capitol Hill, Coinbase has found itself more isolated than usual.
Sen. Cynthia Lummis of Wyoming, one of crypto’s most consistent champions in Congress, said she was “deeply disappointed” by Armstrong’s move, telling colleagues it showed some operators “are just not ready” to accept meaningful oversight.
Policy analysts have been even sharper. One Washington specialist quoted in industry press called Coinbase’s late-stage opposition “farcically inept and entitled,” arguing that if the company had serious objections, it should have pressed them months earlier at the staff level rather than delivering a public broadside on the eve of markup.
Some in the market see less principle and more positioning. Short-selling firm Citron Research, a frequent Coinbase critic, has suggested the company is trying to block a framework that might favor competitors already licensed to deal in tokenized securities.
Not everyone is rallying to the White House, though. Venture capitalist Tim Draper has endorsed Coinbase’s refusal to back the compromise, warning that half-measures could hardwire political favoritism into an industry that was supposed to be built on open access.
Inside Coinbase, Chief Legal Officer Paul Grewal has echoed Armstrong’s defiance in public posts and interviews, signaling the company is ready for a long fight over the shape of U.S. crypto law.
Banks Demand ‘Yield Peace’; White House Squeezes
At the center of the standoff sits a blunt question: who should capture the value of digital dollars?
Large banks view stablecoin yield as an existential threat. If everyday savers can earn real returns on tokenized dollars outside the banking system, deposit bases could shrink. That would cut into the pool of low-cost funding that underpins consumer lending and credit creation.
The Trump White House, according to Terrett’s source, has now drawn a line. It will keep backing the Clarity Act only if Coinbase and other major platforms return to the table and accept an “interest income” deal that calms anxious bank lobbyists.
For the administration, the political math is straightforward. Without banks, there is no broad coalition. Without a coalition, there is no bill. And without a bill, there is no marquee legislative win on crypto policy for the president.
For Coinbase, accepting a yield structure built around bank comfort risks alienating its own users and the DeFi communities it has tried to court, many of whom see on-chain yield as the point of the exercise.
Both sides see the fight in existential terms—just for very different reasons.
Innovation on Hold as Uncertainty Grows
Lost in the personal drama is the commercial reality.
Every month that the Clarity Act sits in committee is another month of regulatory limbo for a market that has grown into the trillions. Institutions that once promised to “wait for clarity” are starting to confront the possibility that clarity may not arrive this Congress at all.
That has concrete consequences. New capital allocations to bitcoin and ether products get delayed. Tokenization pilots for U.S. securities can be pushed abroad. Startups that might have sought licenses in New York or Wyoming can instead incorporate in Dubai or Zug.
Retail users face a different trade-off. In the best case, a revised bill eventually delivers basic consumer protections, clear stablecoin rules, and a path for compliant DeFi interfaces in the U.S. that can compete with offshore venues.
In the worst case, repeated breakdowns in Washington drive more activity to unregulated platforms where users have little recourse when things go wrong.
For now, the industry is stuck between those poles.
One Company, One Bill, and an Entire Market’s Future
A deeper question hangs over the fight: how much sway should a single exchange have over the shape of U.S. financial law?
Administration allies insist the Clarity Act belongs to President Trump and Congress, not to any CEO. Coinbase’s defenders counter that if the leading U.S. crypto platform cannot stomach the current draft, that alone is a warning sign.
Both arguments carry weight. What is becoming clearer is that the cost of failure will not be paid in Washington alone.
It will show up in where the next wave of digital finance is built—and whether the United States chooses to lead it or watch from the sidelines.
