Original Title: "CLARITY Deliberations Suddenly Postponed: Why Are Industry Divisions So Severe?"
Author: Azuma, Odaily Planet Daily

On January 15 Beijing time, an unexpected development occurred for the Cryptocurrency Market Structure Act (CLARITY), which was set to undergo its first Senate deliberation. Eleanor Terrett, a U.S. journalist who has long tracked the progress of cryptocurrency legislation, revealed that due to market controversy triggered by Coinbase's sudden opposition to CLARITY, the U.S. Senate Banking Committee has canceled the scheduled CLARITY markup hearing at 10:00 EST on January 15 (11:00 PM Beijing time tonight). A new deliberation date has not been determined.

Odaily Note: Regarding the deliberation of CLARITY, the Senate Agriculture Committee (the primary oversight committee for the CFTC) had initially planned to conduct its review simultaneously with the Senate Banking Committee (the primary oversight committee for the SEC) on January 15. However, the Senate Agriculture Committee had already postponed its deliberation to January 27. The Senate Banking Committee had continued preparing according to the original schedule but suddenly postponed the session again this morning just before the deliberation.

Introduction to CLARITY (Skippable if Familiar)

Last week, in our article titled "The Biggest Uncertainty for Crypto Markets: Can the CLARITY Act Pass the Senate?", we provided a detailed overview of the content, significance, and progress of CLARITY.

In short, CLARITY aims to clearly distinguish the classification of digital assets and delineate the regulatory responsibilities of the U.S. Securities and Exchange Commission (SEC) and the CommodityFutures Exchange,Futures Trading Commission (CFTC), thereby establishing a clear and functional federal regulatory framework for the U.S. digital asset market to address long-standing issues of regulatory ambiguity and inconsistent enforcement.

For industry participants, the implementation of CLARITY will signify a substantive shift in the regulatory environment. Specifically, there will be more predictable compliance pathways, enabling market participants to clearly understand which activities, products, and transactions fall within the scope of regulation. This will reduce long-term regulatory uncertainty, lower litigation risks and regulatory friction, and attract more innovators and traditional financial institutions to enter the market.

For cryptocurrencies themselves, the implementation of CLARITY is expected to facilitate their recognition as an "asset class more accessible to traditional capital allocation." By addressing institutional uncertainties, it would provide compliant entry pathways for long-term capital that previously could not participate, thereby raising the overall valuation floor of the market.

Severe Industry Divisions

Clearly, the cryptocurrency industry has placed significant expectations on CLARITY for the future regulatory environment. However, as the deliberation approaches, major representative companies in the industry have expressed starkly contrasting positions.

This morning, a key lobbying force for cryptocurrency legislation $Coinbase (COIN.US)$ made it clear that it would oppose the current version of the CLARITY Act.

Brian Armstrong, founder of Coinbase, wrote that the bill is worse than the status quo under its current text and that it would be better to have no bill at all than a bad one—“The bill has significant issues regarding DeFi and stablecoin yields, with some provisions potentially granting the government unlimited access to personal financial records, compromising user privacy, and possibly stifling stablecoin incentive mechanisms.”

Meanwhile, several other representative companies in the industry, including a16z, Circle, Kraken, and Ripple, expressed support for the current version of CLARITY.

Chris Dixon, a prominent partner at a16z and a major proponent of the Web3 narrative, explained: “Cryptocurrency developers need clear rules… Essentially, this bill is designed to achieve that purpose. It is not perfect and requires some amendments before becoming law, but if we want the U.S. to remain the best place globally for building the future of cryptocurrencies, now is the optimal time to advance CLARITY.”

Arjun Sethi, co-CEO of Kranken, explained that legislating around market structures is inherently complex, and friction is bound to arise. The existence of unresolved issues does not mean the effort has failed; rather, it signifies that we are tackling the most challenging tasks… Giving up now would only lock in uncertainty, forcing U.S. companies to operate in ambiguity while the rest of the world moves forward.

Where exactly do the flaws in the current version of the bill lie?

From the statements made by the aforementioned parties, it can be seen that both Coinbase, which strongly opposes the bill, and a16z and Kraken, which have temporarily chosen to support it, share common ground in their attitudes toward the current version of CLARITY. Both acknowledge that the current version of the bill is imperfect and has certain flaws—the difference lies in Coinbase’s more aggressive resistance, directly labeling it a “bad bill,” while a16z and Kraken have opted for more conservative measures, using phrases like “not perfect” and “legacy issues” to soften their stance.

In fact, divisions over CLARITY have long persisted. After passing the House of Representatives on July 17 last year, the bill was originally scheduled for Senate deliberation in mid-2023 but was subsequently postponed to October, then pushed back to the end of last year, and further delayed to 2026. Recently, it appears to face yet another postponement…

The divisions surrounding CLARITY primarily focus on issues such as DeFi regulation, stablecoin yields, and ethical standards concerning the Trump family.

Jake Chervinsky, Chief Legal Officer of Variant and one of the most active lawyers in the industry, explained that although many Democrats have stated they will vote against CLARITY unless restrictions are imposed, ethical issues do not fall under the jurisdiction of the Senate Banking Committee, and therefore cannot be discussed during the confirmation hearing. As such, this disagreement is not currently a focal point of contention.

Note from Odaily: During the upcoming full Senate deliberation, this issue will certainly be a key point of attack for Democratic lawmakers.

As for other core areas of disagreement, Jake Chervinsky broke them down into five finer points as follows.

Point One: The Issue of Stablecoin Yields

The GENIUS Act passed last year banned interest-bearing stablecoins as a compromise to gain support from the banking sector, at the cost of stifling an entire category of innovative products.

However, the banking sector remains dissatisfied with this provision and is attempting to overturn it within CLARITY. While the GENIUS Act prohibits stablecoin issuers from paying holders “any form of interest or yield,” it does not restrict third parties from offering yields or rewards. Yet, Section 404 of the current CLARITY explicitly bans third parties from providing such benefits. If the current version of the bill passes, stablecoin holders will no longer be able to receive any form of yield or reward, except through incentives earned via activities like payments.

Jake Chervinsky criticized the move, arguing that restricting yields or rewards on stablecoins lacks a reasonable policy basis and would only harm U.S. consumers, the international standing of the dollar, and national security. Banks are strongly advocating for this change because large banks earn over $360 billion annually from payment and deposit services, which interest-bearing stablecoins could directly threaten.

Point Two: Tokenization of Securities

Last year, SEC Chairman Paul Atkins launched Project Crypto, aiming to upgrade the financial system by migrating it onto blockchain. However, Section 505 of CLARITY seems to block this goal by stripping away its ability to treat crypto assets fairly.

Paul Atkins emphasized the concept of 'innovation exemptions,' but Section 505 stipulates that securities issued on-chain cannot be exempted or subject to modified regulatory requirements, nor can registration obligations be waived based on this rationale.

Key Point Three: Token Issuance

This may be the most crucial part of CLARITY, providing builders with a clear path to issue tokens without worrying about SEC enforcement actions for issuing "unregistered securities."

Title 1 of CLARITY covers this pathway. It is clear but neither simple nor inexpensive. Title 1 requires many projects to disclose information, which theoretically is beneficial, but the challenge lies in the details—Title 1 includes extremely burdensome disclosure requirements akin to equity-level disclosures, not much different from those required of public companies—including audited financial statements. This system suits mature companies but not startups.

This is just one of many details. Title 1 also mandates that builders must obtain SEC approval for each token; ongoing disclosure obligations are required long after issuance; and the cap for public fundraising is set at $200 million, among other stipulations.

In comparison, creators might as well issue tokens overseas or simply issue stocks instead.

Key Point Four: Developer Protections

Developers of non-custodial software are not money transmitters and should not bear user KYC obligations—this should be uncontroversial.

However, Title 3 of CLARITY repeatedly hints that regulators may extend their oversight reach into the DeFi space. These provisions must be removed or revised.

Key Point Five: Institutional Access

Regulated financial institutions have consistently avoided engaging with DeFi due to compliance concerns.

Article 308 of CLARITY was intended to address this issue but made a critical error—it imposes additional burdens on institutions, making them more likely to be deterred from DeFi than under the current status quo.

Radicals vs. Conservatives

Based on Jake Chervinsky's analysis of the major core issues in the current version of the CLARITY Act, it is not difficult to understand why entities such as Coinbase, a16z, and Kraken unanimously agree—this is not a perfect bill.

Faced with a bill that contains hidden risks, as representatives of the cryptocurrency industry, Coinbase, a16z, and Kraken share fundamentally aligned interests, but their approaches to pursuing those interests differ.

Coinbase has adopted a more aggressive stance of confrontation. The core logic is that if CLARITY passes with provisions unfavorable to the industry—even ambiguously worded ones—they could be exaggerated during enforcement, imposing long-term constraints on innovation. The subsequent costs of amending the law and political resistance may far outweigh the price of continuing to endure the current regulatory uncertainty.

a16z, Kraken, $Circle (CRCL.US)$ and other institutions have adopted a more conservative and 'realist' strategy. In their view, the biggest issue with the prolonged stagnation of U.S. cryptocurrency regulation is not that 'the rules are not good enough,' but rather that there are no rules at all. Although CLARITY may have flaws, it at least provides a legislative starting point that can be revised, negotiated, and gradually improved. Once CLARITY is officially implemented, the U.S. cryptocurrency industry will, for the first time, have a unified federal framework, allowing for subsequent adjustments to specific provisions, which in turn creates more room for operational flexibility.

There is no simple right or wrong here; the crux of the disagreement lies in whether the bill should continue to advance in its current form and how much compromise should be made. Nor is there any "internal conflict within the industry"—both sides share the common goal of improving CLARITY, albeit through different strategic approaches.

As Jake Chervinsky said: "For better or worse, this text will undergo significant changes before it becomes law. Hopefully, it will evolve in a better direction."

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