What Is Coinbase? Why It Can Influence the Legislative Direction of the CLARITY Act?

Coinbase is the first and only licensed cryptocurrency exchange in the U.S. to list directly on the Nasdaq, with compliance being its most defining attribute. It is this very trait that has attracted a multitude of top-tier institutional clients, such as BlackRock ( BLK ), Fidelity, and others, providing custody for billions of dollars in crypto assets for these giants—a feat that even the world's largest cryptocurrency exchange, Binance ( BNB ), cannot rival.

Beyond this, Coinbase holds a critical but often overlooked identity as a co-founder of USDC, the world's second-largest stablecoin. Initially, Circle was responsible for the underlying technology and actual management of USDC reserves, while Coinbase focused on market distribution. In 2023, Coinbase became a shareholder in Circle through a direct equity investment, making it a direct stakeholder in USDC. This is the central reason behind its efforts to advocate for the 'CLARITY Act' legislation.

At the beginning of this year, the Senate was preparing to vote on the CLARITY Act, but the version at the time faced public opposition from Coinbase CEO Brian Armstrong, who stated he could not support it due to its ban on stablecoin yields. After Armstrong took this stance, the Senate Banking Committee was forced to cancel the scheduled vote, causing the bill to stall.

Facing a total ban on stablecoin interest payments proposed by banking groups, Coinbase Chief Legal Officer Paul Grewal actively participated in closed-door meetings to negotiate the provision. On May 1, a compromise was proposed whereby the bill would prohibit yields "equivalent" to bank interest while preserving the "loyalty rewards" and "participation rewards" models used by Coinbase. This balanced the interests of both parties and ultimately moved the legislation forward.

On May 9, pressure was applied to U.S. lawmakers to remove anti-market manipulation provisions from the CLARITY Act to avoid restricting small-cap tokens. Previously, Coinbase utilized its "Stand with Crypto" movement to push bipartisan lawmakers toward a compromise in May, raising the bill's probability of passage from 46% to over 60%.

Coinbase is not a governing authority; why it possesses such significant influence over the CLARITY Act and is even perceived as being able to "sway" its trajectory is primarily based on the following three key dimensions:

Co-promoter of USDC: Coinbase is a primary driver of USDC, the world’s second-largest stablecoin, giving it access to the most direct data and user feedback in the stablecoin market. When drafting technical details such as reserve asset classes and redemption mechanisms, members of Congress must reference the industry practices provided by Coinbase.

The Strongest Crypto "Political Lobbyist": Coinbase has significantly ramped up its lobbying power in Washington in recent years, highly integrating legal battles with political action. Through the Stand with Crypto movement, Coinbase has attracted millions of voters, making Congress aware of the "crypto vote".

Client Power: Coinbase leverages its institutional client base—including giants like BlackRock and Fidelity—to pressure Congress, arguing that clear legislation is key to safeguarding U.S. financial competitiveness and preventing digital dollar hegemony from moving offshore.

It is evident that while Coinbase does not directly hold power, it is backed by three major pillars: the law, voters, and capital. This allows it to drive the CLARITY Act’s evolution in a direction favorable to its interests.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.