White House Advisor Warns Crypto: Compromise Now or Face Harsher Rules

The core of the dispute was laid bare on social media platform X, where Patrick Witt directly countered Coinbase CEO Brian Armstrong’s recent assertion that ‘no bill is better than a bad bill.’ Witt characterized this position as a ‘luxury’ afforded only by the current administration’s favorable stance toward digital assets. ‘Assuming a multi-trillion-dollar industry will continue to operate indefinitely without a comprehensive regulatory framework is pure fantasy,’ Witt stated. His argument frames the current moment not as a choice between regulation or no regulation, but as a critical decision over who writes the rules and when.

Witt, representing the executive branch’s perspective, emphasized that crypto regulation is inevitable. The debate, therefore, is about ‘timing and authorship rather than whether rules will materialize at all.’ He warned the industry that the present political alignment—with Republicans controlling both congressional chambers and the presidency—offers a uniquely favorable environment. Letting this opportunity slip by allowing legislative momentum to collapse, he suggested, could lead to a much less sympathetic regulatory regime in the future, particularly if Democrats were to craft rules in the wake of a financial crisis.

The legislative vehicle at the heart of this clash is the CLARITY Act, a bill designed to clarify the long-contested jurisdictional boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in overseeing cryptocurrency markets. The process has hit significant turbulence. Both the Senate Banking Committee, chaired by Tim Scott, and the Senate Agriculture Committee have postponed scheduled votes as lawmakers work to build broader bipartisan coalitions.

Complicating matters further, Coinbase—a major donor to the Trump campaign—withdrew its support for the current draft of the bill. The exchange cited specific concerns over language affecting tokenized securities, decentralized finance (DeFi) privacy protections, and, most prominently, restrictions on stablecoin yield products. This last point has become a key point of contention with traditional banking institutions, which are wary of crypto companies gaining a competitive advantage. Armstrong described the disputed provisions as ‘problematic’ and potentially damaging to innovation, arguing the current text could create worse conditions than the existing regulatory uncertainty.

Witt’s intervention is a clear political ultimatum to the industry. ‘You might not love every part of the CLARITY Act, but I can guarantee you’ll hate a future Dem version even more,’ he wrote. His message underscores the hard arithmetic of the U.S. Senate: passing any significant legislation requires reaching a 60-vote threshold, which inevitably demands compromise. He urged stakeholders to ‘not let perfect be the enemy of the good.’

Despite the public disagreement, avenues for negotiation remain open. Brian Armstrong clarified that Coinbase is still engaged in the legislative process and committed to finding solutions. Signaling a direct approach to one major sticking point, Armstrong announced plans to engage traditional bank leaders at the World Economic Forum in Davos to find middle ground on the stablecoin yield dispute. This indicates the company has not abandoned efforts to shape the legislation but is seeking changes before offering renewed support.

With the Senate Agriculture Committee setting a markup session for January 27 and the Banking Committee yet to reschedule its postponed session, the clock is ticking. Patrick Witt’s warning highlights a growing tension within the crypto community between idealists holding out for perfect terms and pragmatists recognizing a closing window of opportunity. The outcome will determine whether the industry secures a foundational regulatory framework under a sympathetic administration or rolls the dice on an uncertain political future.