Coinbase CLO Paul Grewal urges the Clarity Act to settle stablecoin jurisdiction, limiting SEC overreach. A committee markup this quarter is the next catalyst for crypto markets.
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Coinbase Chief Legal Officer Paul Grewal is pressing Congress to pass the Clarity Act, a stablecoin bill that would define jurisdiction over digital-dollar tokens and limit SEC enforcement power. The push frames legislative action as the only reliable path to resolve regulatory uncertainty that has pressured stablecoin issuers and exchange operations since the SEC escalated actions in 2023.
The Clarity Act would assign stablecoin oversight to a federal banking regulator rather than the SEC, effectively classifying payment stablecoins as non-securities. That classification would strip the SEC of the authority it used against BUSD, Kraken's staking service, and other token-based products. Under the current framework, the SEC treats most stablecoin reserves as investment contracts, exposing issuers to registration demands and enforcement investigations. The bill would replace that case-by-case risk with a statutory safe harbor tied to reserve quality, redemption rights, and disclosure rules.
Grewal's public campaign targets a congressional calendar that has stalled stablecoin legislation for more than a year. Similar bills, including the Lummis-Gillibrand Payment Stablecoin Act, have advanced through committees but failed to reach a floor vote. The Clarity Act proposes a simpler jurisdictional fix, which may appeal to moderate Democrats and Republicans who want to end the SEC's aggressive posture without creating a full crypto regulatory framework.
If the Clarity Act fails to pass, the largest exposure falls on Circle (USDC) and Paxos, which have already faced SEC subpoenas and settlement demands. Tether (USDT), while not registered in the US, relies on US-based counterparties for banking and liquidity, making it vulnerable to SEC actions that freeze on-ramps. Coinbase itself depends on stablecoin trading volumes for fee revenue and on USDC integration for its Base network's liquidity. A continued SEC enforcement campaign risks choking off dollar-pegged token supply, reducing on-chain activity and exchange volumes.
Exchange exposure is not limited to Coinbase. Binance.US, Kraken, and Gemini all list stablecoins as top pairs. Any SEC action that forces delisting or limits reserve custody would cascade through spreads and market depth, particularly during volatile sessions when traders flee to stablecoins.
The current session of Congress has until the end of 2024 to pass stablecoin legislation before the next election redistributes committee leadership. Grewal's public urging coincides with an SEC enforcement ramp-up that included a Wells notice to Uniswap Labs and an investigation into crypto-native banks. The Clarity Act needs bipartisan sponsorship and a mark-up in the House Financial Services Committee, where Chair Patrick McHenry has pushed for stablecoin bills previously. A committee vote this quarter would set up a floor debate by year-end.
Confirmation of the risk-reducing scenario comes from a committee approval with bipartisan support. That signal would push stablecoin supply higher as issuers pre-position for compliant reserve structures. A floor introduction with co-sponsors from both parties would further reduce legal uncertainty, compressing the discount on USDC and USDT relative to par.
A negative scenario unfolds if the bill stalls or the SEC issues an enforcement action against a major issuer, such as a subpoena to Circle or a lawsuit targeting Tether's reserve disclosures. That outcome would drive stablecoin premiums above $1 in the secondary market and raise exchange credit risk. For traders and liquidity providers, the next 60 days are the critical window: either committee markup pushes the bill forward, or the SEC fills the vacuum with new legal claims.
For traders watching the regulatory landscape, the Clarity Act's fate on the Hill is the single most consequential catalyst for stablecoin liquidity and exchange risk through year-end.
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Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.