As the US CLARITY Act faces restrictions on DeFi and stablecoin provisions, crypto exchange Coinbase is threatening to withdraw its support. The platform warns amid the latest proposal to curb DeFi activity and ban stablecoin reward programs.
The growing debate is centred on whether decentralized finance and stablecoin reward models could disrupt the traditional banking system. Just days ahead of the CLARITY Act markup, the crypto and TradFi industries are clashing over these specific provisions.
Will Coinbase Withdraw Support for the CLARITY Act?
According to a Bloomberg report earlier today, Coinbase, the largest crypto exchange in the US, is urging lawmakers to oppose restrictions on DeFi features in the CLARITY Act. As the crypto bill moves towards its final phase, the company is pushing back against the provisions that could potentially damage the DeFi ecosystem.
People familiar with the matter stated that Coinbase “may reconsider its support” for the CLARITY Act. The crypto exchange reportedly warns that if the bill restricts stablecoin issuers from offering rewards, it could hamper innovation in the country.
Notably, this growing debate comes amid a new advocacy group’s emergence, as reported by CoinGape. A group called ‘Investors For Transparency’ is claiming that the DeFi provision poses critical threats to the banking industry. Thus, the group is running a campaign to urge lawmakers to ban the DeFi and stablecoin provisions within the market structure bill.
Meanwhile, the digital asset community is pushing lawmakers to oppose the anti-crypto group’s arguments. The Stand With Crypto group has reportedly sent 135,000 emails to senators to protect the stablecoin rules. The group wrote on X,
“We’re getting one step closer to passing market structure legislation in the U.S. Senate and establishing the clear and fair “rules of the road” digital assets need. BUT: It has to happen WITHOUT reopening or restricting stablecoin rewards offered by platforms or other third parties.”
Crypto vs Banking Debate Heats Up
As the crypto industry is eagerly waiting for the January 15 Senate vote on the CLARITY Act, the banking industry has raised concerns about the DeFi provision’s potential consequences. They believe that allowing stablecoin issuers to provide rewards to crypto exchanges could negatively impact the TradFi space. According to them, stablecoin adoption could pull out a staggering $6.6 trillion from the banking industry.
At the same time, the crypto industry is actively advocating for the stablecoin provision. While stablecoins have become an integral part of the global industry, they intend to foster the sector’s growth. If stablecoin issuers like Circle offer rewards, it will allow users to earn around 3.5%. If this rule is banned, it could impact crypto exchanges like Coinbase.
