Regulatory Standoff Clouds Coinbase’s Growth Trajectory

A political impasse has emerged in Washington following Coinbase's decision to withdraw its support from a pivotal piece of cryptocurrency legislation. The exchange's reversal stems from a calculation that the proposed rules, in their current form, would erase billions in future revenue, casting immediate uncertainty over the investment thesis for its shareholders.

At the heart of the dispute is the "Digital Asset Market Clarity Act" (CLARITY Act). Coinbase management concluded that the draft legislation would effectively outlaw yield generation on stablecoins. This is a critical revenue stream: the company currently earns interest of approximately 3.5% through its USDC Rewards program, a lucrative operation contributing roughly $1 billion in annual revenue.

The proposed bill's ramifications extend further. It would place a de facto ban on tokenized equities and impose significant restrictions on decentralized finance (DeFi) operations. Following Coinbase's withdrawal of support, the U.S. Senate committee has already postponed its scheduled markup of the bill.

Political Pressure and a Stalemate

Recent weekend reports indicated the White House might also reconsider its backing of the legislation. CEO Brian Armstrong countered this, denying suggestions of governmental "displeasure." Instead, he stated the administration is urging Coinbase to engage in direct negotiations with major banking institutions.

The political pressure is intensifying, with regulators demanding a compromise between traditional banking interests and the crypto industry. Coinbase has refused to accept what it terms a "bad deal" that would jeopardize its high-margin stablecoin business. For investors, this stalemate translates into near-term volatility, undermining regulatory clarity—a cornerstone of the bullish investment narrative for 2026.

Should investors sell immediately? Or is it worth buying Coinbase?

Institutional Analysts Maintain a Bullish Stance

Despite the headwinds, institutional research firms have largely reaffirmed their positive outlook. On January 17, 2026, Rothschild & Co Redburn made a minor adjustment, lowering its price target from $404 to $403 per share while maintaining its Buy recommendation. This still implies an upside potential of over 67% from current levels.

This slight recalibration reflects a fine-tuning of expectations rather than a fundamental downgrade. The company's third-quarter 2025 results bolster this view, with Coinbase surpassing revenue forecasts by posting $1.9 billion.

Core Strategy Faces Legislative Hurdle

Irrespective of the legislative battle, Coinbase continues to advance its "Everything Exchange" strategy for 2026, targeting expansion into traditional equities, commodities, and prediction markets. Its Subscription and Services segment, which generated $747 million in Q3 2025 (about 40% of total revenue), remains a key driver. These revenues are primarily fueled by its core stablecoin rewards and staking operations.

It is worth noting that company insiders have sold shares valued at approximately $240.7 million over the preceding three months. The market now awaits fourth-quarter 2025 results, scheduled for release on February 12, 2026. Until the conflict surrounding the CLARITY Act is resolved, Coinbase shares are likely to exhibit heightened sensitivity to developments from the U.S. capital.