The cryptocurrency industry misses a significant opportunity, and all parties begin mutual accusations.

Written by: Dylan Tokar, Kevin T. Dugan, Vicky Ge Huang, The Wall Street Journal

Translated by: Luffy, Foresight News

In January of this year, Maryland Democratic Senator Angela Alsobrooks was still on vacation when she received a voicemail from Coinbase CEO Brian Armstrong, lasting about three minutes. This Democratic senator is a key figure in the negotiations of the CLARITY bill, which aims to promote broader usage of digital assets. The two had been communicating for months, and when negotiations involving Alsobrooks and other senators became tense, some participants in the bill's efforts believed that the CEO's tone during his communication with the American senator was inappropriate.

Armstrong is the most well-known lobbying representative of the cryptocurrency industry in Washington, and he accused the amendment pushed by Alsobrooks of potentially restricting Coinbase's ability to continue offering interest-like rewards on cryptocurrencies. The banking industry is concerned that such products could divert customer deposits, and thus is vehemently opposing this business.

In January of this year, Coinbase CEO Brian Armstrong appeared on Capitol Hill

According to insiders, in the voicemail, he expressed to the senator: Once you make a concession, the banks will just take more.

Less than two weeks later, just as the bill was about to move forward for a vote, this Coinbase CEO made a shocking move that rattled the entire industry, announcing that he would no longer support the earlier version of the bill. Before a crucial Senate vote on January 15, he posted on the X platform: It is better to have no bill than to put forward a bad one.

This bill, named CLARITY, experienced months of lengthy negotiations and ultimately failed in a Senate vote this week. The cryptocurrency industry had just begun to taste the sweetness of an expanding lobbying power and the support of President Trump, making this loss a significant setback.

Accusations erupted. Some executives from cryptocurrency companies and lawmakers blamed the failure on Democratic opposition. In June, Trump disclosed his substantial cryptocurrency asset gains, reigniting public ethical debates concerning the president's commercial assets. As we move towards 2026, issues such as the Iran situation, inflation, and societal backlash against data centers and uncontrolled AI entities are crowding out the legislative priorities of lawmakers. Some also believe that the industry should have seized the opportunity at the beginning of the year to finalize the bill but missed the chance.

The CEO of Coinbase, the largest cryptocurrency exchange in the United States, is at the center of the storm, acting as the de facto leader of the cryptocurrency industry in the Washington power struggle, wielding significant influence over the bill. Participants in the negotiations say that aside from Trump, almost no one matches Armstrong's sway. He visited Washington 13 times during the election period leading up to the September 2024 vote, and his lobbying team held tactical meetings with various industry players weekly for several months.

Insiders say this 43-year-old billionaire effectively possesses the power to veto clauses he does not agree with and has indeed invoked this power multiple times, significantly increasing resistance in an already complex legislative process. Many within the industry also support his hardline stance.

Ripple CEO Brad Garlinghouse stated: "We had good momentum in January this year. But some in the industry effectively shot themselves in the foot."

Coinbase stated that Armstrong's decision to withdraw support in January was based on overall interests in the cryptocurrency industry, as the team discovered multiple issues in the bill's clauses at that time. Coinbase's Chief Policy Officer Faryar Shirzad said in a statement: "We have made numerous compromises to maintain industry alliances and push the legislation forward."

The emergence of power brokers

Armstrong co-founded Coinbase in 2012 and became an important political fundraiser and donor for the Republican Party in 2024, pushing the cryptocurrency community to become a significant political voting force.

After Trump's inauguration, Armstrong quickly took on the role of lobbying for cryptocurrency legislation. His first test was the Genius Act—a regulatory bill regarding stablecoins. This Coinbase leader presented a striking image while lobbying for the bill on Capitol Hill: bald and dressed in a navy blue suit. The bill ultimately gained significant Democratic support and was signed into law by Trump last summer.

This was a major victory for the industry and established Armstrong's position as a political power broker in the cryptocurrency circle. Subsequently, negotiations for the CLARITY bill commenced.

This bill can be seen as a sister bill to the Genius Act but has a much broader scope, addressing numerous sub-sectors of the cryptocurrency industry. During Biden's administration, cryptocurrency companies faced regulatory crackdowns and multiple lawsuits, and the industry hoped to write a permanent regulatory framework into law to ensure the rollout of new products and avoid regulatory backlash should the policy direction change. The new bill would also promote the further integration of cryptocurrency assets into the mainstream financial system.

The banking industry views this bill as an opportunity to attempt to eliminate what they consider competitive threats equivalent to interest-bearing deposits within the cryptocurrency ecosystem. Stablecoin issuers have long been prohibited from paying interest on tokens, but banks also hope to end their cooperation with firms they believe are evading the ban.

Coinbase is the most well-known example. The company entered a revenue-sharing agreement with USDC stablecoin issuer Circle, tying the revenue-sharing amount to the volume of USDC held within exchanges. Additionally, Coinbase previously promoted that USDC could yield an annual reward of up to 3.75%.

The banking lobby groups believe arrangements like Coinbase's could lead to a massive outflow of deposits, harming banks' ability to lend and dragging down economic activity.

As negotiations regarding the CLARITY bill escalated, Armstrong strongly opposed clauses that would limit Coinbase's rewards business. Participants in negotiations noted that he was very stubborn when negotiations reached a deadlock, even causing discomfort among the Senate allies who originally supported the bill.

Insiders said that Armstrong would directly bypass congressional staff and engage in sharp conversations with senators, including those who were originally inclined to support the bill.

The dispute over stablecoin interest payments erupted publicly in January this year. Negotiators said that the early draft of the bill left Armstrong and others feeling dissatisfied with its direction.

Coinbase's Shirzad stated in a statement that Armstrong maintained good relationships with senators from both parties and always communicated respectfully. "This is a high-stakes negotiation, and differences are inevitable, but differences do not equate to rudeness."

Alsobrooks's spokesperson said they would not comment on private conversations, but that she has had positive and productive communication with Armstrong and other digital asset and banking industry leaders. "Senator Alsobrooks's goal is always to regulate this emerging technology that is worth billions of dollars."

A 15-page compromise proposal

Shortly after the Senate committee's vote was postponed, Armstrong accused banks on television of using customer deposits without depositors' permission, targeting banks' longstanding lending practices. This statement angered Wall Street executives. According to The Wall Street Journal, at the World Economic Forum in Davos in late January, JPMorgan CEO Jamie Dimon directly accused Armstrong of lying.

The grievances between both sides persisted, and negotiations over stablecoin rewards lasted five months. Some in the cryptocurrency industry felt they were suffering defeat on core issues.

In May this year, Senator Alsobrooks announced a compromise proposal with Republican Senator Thom Tillis: it would not directly prohibit stablecoin rewards but would force Coinbase to adjust its existing rewards program. Armstrong agreed to the proposal, and Coinbase stated it was a significant concession. However, the banking industry felt the compromise was far from sufficient.

The negotiating team then began addressing a large number of outstanding issues. For the bill to pass, it needed to secure a small number of Democratic votes. By the end of June, Republicans pushed to restart bipartisan discussions by submitting a 15-page document containing numerous compromise proposals to Democrats on the Senate Agriculture Committee. Insiders said that the following day, Democrats expressed their willingness to accept most of the proposals.

However, Armstrong indicated he opposed it. After learning that the Coinbase CEO did not support certain clauses, Republicans were forced to shelve multiple proposals, which left the Democrats perplexed.

Shortly after, the political environment for the bill further deteriorated. Trump revealed that his family’s meme coins and cryptocurrency businesses generated $1.4 billion in revenue in 2025, an unprecedented amount of cryptocurrency earnings for the American president.

Democrats seized this disclosure as a key topic for attack ahead of the midterm elections. They also emphasized ethical clauses within the CLARITY bill, proposing to prohibit public officials from holding cryptocurrency assets, which would apply to Trump and his family, demanding that the president and his children divest substantial cryptocurrency assets.

The Trump factor

By late summer, the CLARITY bill had exceeded 600 pages. Participants in the negotiations stated that lawmakers from both parties were weary of the lengthy discussions and numerous negotiating parties. The banking industry continued to weaken the bill’s clauses, with community bankers traveling to Washington to present their case that the bill posed an almost existential crisis for them.

At the same time, congressional staff in both the House and Senate grew frustrated with the cryptocurrency lobby, particularly dissatisfied with Armstrong and his team, who continuously pressured for concessions favorable to Coinbase and the industry.

The atmosphere during negotiations became extremely tense. One of the key designers of the bill, Republican Senator Cynthia Lummis, who is one of the cryptocurrency’s most important allies in Congress, refused to meet with a member of Armstrong's lobbying team earlier this year.

Lummis's spokesperson said they would not comment on private meetings, but "we maintain a good relationship with Coinbase and appreciate their ongoing efforts to push the CLARITY bill forward."

In August, Trump convened Armstrong and other cryptocurrency and finance executives at the White House for a meeting, which was livestreamed in its entirety. During the meeting, the president joked around and afterward led the executives on a tour of the Oval Office. The Senate’s recess entered August, delaying the bill's vote.

Last weekend, Republican senators released a new version of the bill, in which the Trump administration made new concessions, adding clauses requiring the president to place his cryptocurrency assets in a confidential trust. However, Democrats remained unsatisfied.

A White House official stated that the Trump administration agreed to the most comprehensive ethical clauses ever.

On Tuesday, the bill failed to obtain the necessary 60 votes to advance, failing at the final procedural hurdle. Coinbase's stock closed down more than 10%. Just two days later, the industry saw a turnaround: the U.S. Securities and Exchange Commission allowed tokenized stocks to be traded in the U.S., causing Coinbase's share price to surge by 12% on Friday.

On Saturday morning, Armstrong posted on the X platform, stating that even though the bill ultimately failed, the final text was an improvement over early drafts. "I am proud of this effort; even if I had to do it all over again, I would still do it, because the negotiation produced a better bill. This is just one step in a long process."