Coinbase executives Paul Grewal and Faryar Shirzad have publicly supported the Clarity Act, also known as the Clarity for Payment Stablecoins Act or CLARITY. They are advocating for a new law that would limit the SEC’s power to regulate the crypto industry through enforcement actions, and instead establish clear rules for privately issued payment stablecoins.
This isn’t just an exchange trying to influence policy for its own benefit. It’s a clear effort to change the law and permanently decide who regulates stablecoins – the SEC or the market itself. Currently, court decisions on these issues can be overturned, but changing the law would make any decision permanent.
This move comes as the SEC continues to argue in court that many digital assets are actually securities, based on a legal standard called the Howey Test. Coinbase is currently fighting this claim in its own lawsuit against the SEC.
Private money isn’t automatically riskier than private services like healthcare, security, or transportation. What truly matters is how that money is managed, and having both access and proper oversight. CLARITY helps achieve all of these things.
— Paul Grewal (@iampaulgrewal) May 25, 2026
Grewal, a frequent critic of the government’s approach to regulating through enforcement actions, argues that positive court decisions aren’t enough. He believes Congress needs to pass a law clearly defining the rules for digital assets like USDC to give companies the confidence to invest heavily in them.
We believe the recent, coordinated effort to influence policy is directly related to Coinbase’s ongoing legal battles. A new law clearly stating that payment stablecoins aren’t under the SEC’s control would not only help Coinbase achieve its desired policy outcomes, but would also significantly undermine the SEC’s legal arguments in other cases. Establishing this as federal law – that stablecoins aren’t investment contracts – is much more important to Coinbase than winning any individual lawsuit.
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Clarity Act News: Clarity for Payment Stablecoins Act, What the Bill Establishes and Why the SEC Enforcement Gap Matters
The proposed Digital Asset Market Clarity Act is the most detailed effort so far by the federal government to create a clear set of rules for companies issuing stablecoins – digital currencies designed to maintain a stable value – within the U.S.
This legislation complements the GENIUS Act, a law passed in July 2025 that set basic standards for reserves and transparency for stablecoins. Now, this new bill aims to expand those same standards to cover the entire digital asset market.
Coinbase leaders believe these two laws already provide a strong regulatory framework, making additional bank-like rules for stablecoin companies redundant and illogical.
A recent article in the Wall Street Journal by Greg Ip raises a valid point: could stablecoins pose an economic risk simply because they function as “private money”? However, the article’s perspective overlooks the historical reality of how the US monetary system has operated for the past 160 years. The idea of “private money” isn’t unusual in our…
— Faryar Shirzad 🛡️ (@faryarshirzad) May 25, 2026
Here’s how the system works: The GENIUS framework legally prevents stablecoin issuers from making loans, borrowing/lending through maturity transformation, using borrowed money (leverage), or operating with less than full backing. Instead, they must fully back every stablecoin with cash and short-term U.S. Treasury bonds, prove their reserves monthly, and publicly display exactly what those reserves consist of.
As a researcher studying financial structures, I’ve found Shirzad’s explanation of the difference between banks and what he calls ‘GENIUS issuers’ particularly insightful. He points out that banks are heavily regulated due to their core functions – lending money, managing different loan terms, operating with high leverage (around 10 to 1), and essentially creating credit. In contrast, these GENIUS issuers are legally restricted from doing *any* of those things. They’re required to hold cash and very short-term US Treasury bonds, dollar for dollar, to cover any immediate withdrawals. Essentially, they don’t make loans.
The CLARITY Act aims to define which financial regulator—the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC)—oversees different types of digital assets. It would also create rules for registering and ensuring compliance for digital asset exchanges and other companies that facilitate transactions. The Senate Banking Committee is moving the bill forward, but the Senate and House still need to agree on a final version.
Recent data from Polymarket suggests people betting on prediction markets currently give the Senate about a 50/50 chance of passing the legislation before the November deadline. This reflects real doubt about whether the Senate can complete its work before the election season begins and legislative opportunities dwindle.
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2026-05-26 18:31