White House Threatens to Pull Crypto Bill Support Over Coinbase Withdrawal

The Trump administration is considering withdrawing support for landmark crypto market structure legislation unless Coinbase returns to negotiations with a stablecoin yield agreement acceptable to banks, according to Fox Business reporter Eleanor Terrett. A source close to the administration called Coinbase’s Wednesday withdrawal a “rug pull” against the White House and the broader crypto industry.

The escalation marks a dramatic reversal in what many expected to be smooth passage of the Clarity Act, which the House approved in July 2025. Coinbase CEO Brian Armstrong pulled support just hours before the Senate Banking Committee’s scheduled Thursday vote, forcing an indefinite postponement of the markup.

The Stablecoin Yield Battle

At the heart of the dispute lies Section 404 of the bill, which would prohibit stablecoin issuers from offering yield “through any mechanism” — not just directly, but also through exchanges, affiliates, or partners. Banks have lobbied intensively for these restrictions, with over 3,000 banks signing a petition warning that allowing crypto companies to offer interest-like rewards would siphon trillions from local lending.

Coinbase reported $355 million in stablecoin-related revenue in Q3 2025, making yield restrictions an existential business threat. Armstrong argued the provisions protect traditional banks from competition rather than consumers from risk. The company offers yield to holders of its USDC stablecoin through various partnership structures that the new language would effectively eliminate.

Beyond Yield: Armstrong’s Other Objections

Armstrong’s withdrawal cited three additional deal-breakers in the 270-page bill released Monday. The legislation would effectively ban tokenized equities — blockchain versions of stocks and real-world assets — directly undermining Coinbase’s publicly stated 2026 expansion plans. Armstrong also warned that DeFi surveillance provisions would represent the most significant expansion of government financial surveillance power since the 2001 Patriot Act, granting authorities unprecedented access to transaction data.

The CEO criticized language reducing the Commodity Futures Trading Commission’s role in favor of expanded SEC authority, reversing what many in the industry viewed as a core promise of the legislation. These concerns resonated with privacy advocates but drew pushback from lawmakers focused on preventing illicit finance.

Industry Fractures Over Strategy

The crypto industry’s response to Armstrong’s move reveals deep strategic divisions. Ripple CEO Brad Garlinghouse, speaking from Switzerland, said he was “surprised how vehemently” Coinbase opposed the bill, noting that much of the industry remains committed to negotiating improvements rather than walking away entirely.

Miles Jennings, Andreessen Horowitz’s top crypto executive, directly countered Armstrong’s position, stating the bill “isn’t perfect” but must pass—a remarkable public disagreement given that Andreessen Horowitz and Coinbase jointly fund Fairshake, the industry’s primary super PAC with $116 million raised for 2026 midterm elections.

Political Dynamics and Ethics Conflicts

According to multiple reports, the White House rejected certain ethics provisions in the bill because they could affect President Trump’s family financial interests in the crypto sector. Democrats on the Senate Banking Committee pressed for stronger ethics language to prevent senior officials from personally profiting from crypto-related activities.

Chairman Tim Scott responded that ethics matters fall under a different committee’s jurisdiction, but the public disagreement highlighted the complex political dynamics at play. Scott’s inability to secure unanimous Republican support on his own committee signals that building a coalition for comprehensive crypto legislation remains extraordinarily challenging.

Follow us on Bluesky, LinkedIn, and X to Get Instant Updates