January was poised to be a pivotal month for the cryptocurrency sector. Discussions in the Senate were set to dive into the nuances of the CLARITY Act, a significant legislative proposal aimed at defining the legal framework for the U.S. crypto market. This legislation sought to clarify which digital assets would be classified as securities or commodities, outline the regulatory duties companies must follow, and establish legal protections for consumers. The House had already given its approval months earlier, and the White House was prepared to endorse it. Both Democrats and Republicans appeared to be in sync regarding the bill’s core principles.

For an industry long mired in regulatory ambiguity, a definitive set of guidelines seemed within reach. While not flawless, these regulations promised a stable foundation. “We don’t want to be in a situation where the rules for software and publication shift with each new administration,” remarked Connor Brown, Head of Strategy at the Bitcoin Policy Institute, in an interview with The Verge.

However, just before midnight last Wednesday, those plans unraveled.

Mere hours before the Senate Banking Committee was scheduled for a crucial markup session on Thursday—where bipartisan negotiations would refine every word and clause of the extensive draft for a final Senate vote—Coinbase, the leading crypto exchange globally, announced its withdrawal of support for the CLARITY Act after reviewing its final draft.

CEO Brian Armstrong took to X, stating, “We’d prefer no bill over a flawed one,” and attributed the sudden shift to external pressures from major banks. These banks, via their lobbyists, had intervened late in the process to mitigate the risk of customers opting for crypto wallets over traditional savings accounts.

Armstrong’s concerns were numerous, but a key sticking point for Coinbase was the ability of crypto holders to earn interest or rewards from stablecoins, which are tokens pegged to the US dollar’s value, similar to interest earned on conventional bank deposits. (Coinbase did not respond to requests for further comments.)

Banking committee chairman Tim Scott (R-SC) immediately cancelled the markup, just a “brief pause” to renegotiate. Lobbyists began calling around and analysts began dissecting the draft. But notably, the vast majority of crypto’s biggest players, from exchanges to investors, publicly announced that they would support the Senate bill, and implicitly bashed Coinbase for derailing its passage.

“Reasonable people can disagree on specific provisions. That is precisely why the final stage of this process matters,” Kraken CEO Arjun Sethi said on Thursday, reaffirming his support of the CLARITY Act. “The right response to outstanding issues is to resolve them not to abandon years of bipartisan progress and start over from scratch.” His sentiment was shared by a16z managing partner Chris Dixon, Ripple CEO Brad Garlinghouse, and even David Sacks, the powerful White House special advisor on AI and Crypto, who urged Coinbase to “resolve any remaining differences” before the end of the month.

While the rest of the industry is willing to deal with the problems Armstrong pointed out in exchange for having a law, Coinbase — a publicly-traded company that offers yield-bearing stablecoin accounts — would suffer the most if the interest issue remains intact. But there is a real deadline to lock in any sort of meaningful crypto legislation, and it starts the moment that members of Congress begin running for re-election.

Midterm elections are generally guaranteed to kill any incentive for bipartisan consensus, but especially so in this cycle, where elected officials will have to face furious constituents who might see support of CLARITY as a proxy for supporting Trump. It doesn’t help that the Senate Republicans are trying to box out a Democrat-written provision that would prevent Trump from profiting off of crypto assets. Campaigns start in March, and the Senate is not in session next week, giving them less than a month to hammer out any issues before switching to campaign mode.

That is an exceedingly short amount of time for the Banking Committee to renegotiate new language, mark up that bill, send it to the Senate Agriculture Committee (which is responsible for regulating commodities), and negotiate even further before it even hits the Senate floor for a full vote. And “floor time” — when the Senate can summon all 100 members to vote for a bill in person — is an increasingly rare commodity before the election season. (Most of it will likely be burned on averting yet another government shutdown.)

Punting the bill to next year isn’t a safe option, either. It’s widely expected that the Republicans will lose either the House or the Senate, giving Democrats the means to block CLARITY’s passage for whatever reason they cite. And while the current president might be a steadfast ally to the crypto industry, there’s no telling who will come after him, much less how they’d feel about crypto.

“Will we ever have a setup as favorable as we do right now? Hard to imagine,” Seth Hertlein, the global head of policy at Ledger. “Could it happen? Sure, maybe, nobody knows. But there’s definitely a sense that if we don’t get it done now, either it’s not going to happen, or it will happen on much less favorable terms.”

In the meantime, however, DC policymakers are frustrated that Coinbase reopened a debate that had seemingly been settled last year: the House had already spent years writing and negotiating a crypto market structure bill, which passed last August with an overwhelmingly bipartisan vote. In the defense of Coinbase, the Senate’s version now had to contend with the demands of the finance industry, which had not initially weighed in on crypto market structure until late last year, as well as the progressive Democrat Senators on the committee. And, of course, the Senate had insisted on writing its own version of the bill instead of working off the House’s version.

“The Senate is where House bills go to die,” said Hertlein. “That’s a common Washington bubble joke.”