Coinbase CEO Says CLARITY Act Could Protect Crypto Users From Another FTX Collapse

Coinbase CEO Brian Armstrong is making a fresh case for the U.S. Congress to pass the CLARITY Act, arguing that clearer rules and stronger safeguards for digital asset platforms could help prevent another collapse like FTX.

In an interview with CBS News on Aug. 20, Armstrong said the lack of clear U.S. rules has left ordinary crypto users exposed to risks that would be less acceptable in traditional financial markets.

“The current status quo today is that there isn’t much clarity about what the rules are,” Armstrong said. He argued that the proposed legislation would establish a stronger set of consumer protections and give regulators clearer authority over the industry.

His comments come as the Digital Asset Market Clarity Act, formally known as H.R. 3633, moves toward a potentially important Senate vote. The bill is not law, and its final provisions could still change.

The Senate has scheduled a cloture vote on the legislation for Sept. 15, according to the Senate Democratic Caucus.

For Armstrong and other crypto executives, the debate is no longer only about whether digital assets should be regulated. It is increasingly about what those rules should require exchanges and other intermediaries to do with customers’ money and crypto.

Why Armstrong is linking CLARITY to FTX

FTX’s failure remains one of the strongest arguments for tighter controls around centralized crypto exchanges.

The exchange collapsed in November 2022 after customers rushed to withdraw funds and concerns mounted over the financial condition of FTX and its affiliated trading firm, Alameda Research.

U.S. prosecutors later said FTX founder Sam Bankman-Fried misappropriated billions of dollars in customer funds and used them for investments, loan repayments, and other purposes. He was sentenced to 25 years in prison in 2024.

The Securities and Exchange Commission also alleged that Alameda was able to divert FTX customer funds and use them for trading and other purposes.

The episode exposed a fundamental problem with centralized crypto platforms: customers can believe they own assets that are safely held in custody while the company controlling those assets may be taking risks that customers cannot easily see.

That is the type of problem Armstrong says a market-structure law should address.

The argument is relatively straightforward. If exchanges must keep customer assets separate, maintain appropriate financial controls, disclose important risks, and operate under consistent federal supervision, it becomes harder for an exchange to treat customer property as its own balance-sheet resource.

That would not make a future exchange failure impossible. It could, however, make the specific type of misconduct associated with FTX more difficult.

What the CLARITY Act would change

The CLARITY Act is much broader than a set of rules aimed specifically at exchanges.

The legislation seeks to establish a federal framework for digital assets and divide regulatory responsibilities between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The House passed its version of H.R. 3633 in July 2025. The bill’s official legislative record describes a framework for regulating the offer and sale of digital commodities and assigning responsibilities to the SEC and CFTC.

The Senate has since developed its own version. In July, Sen. Cynthia Lummis, chair of the Senate Banking Committee’s Digital Assets Subcommittee, released updated text combining work from the Banking and Agriculture committees.

That means the bill currently being considered is not simply the same legislation that passed the House.

Among its central goals is to clarify whether particular digital assets and activities fall primarily under securities or commodities regulation.

That distinction matters because the SEC and CFTC have different mandates, registration systems and enforcement powers.

For years, crypto companies have complained that uncertainty over which agency has authority has made it difficult to determine what rules apply before launching products or services.

Supporters of CLARITY say a clearer division of responsibility could allow companies to comply with rules before problems occur rather than discovering the government’s position through enforcement actions.

Customer assets are at the center of the debate

The part of the legislation most closely connected to the FTX lesson is its treatment of customer assets.

The House version included requirements designed to prevent digital commodity exchanges from mixing customer property with their own assets. It also contained provisions intended to give customer assets specific treatment in bankruptcy proceedings.

In practical terms, segregation means an exchange should not be able to take crypto deposited by one customer and freely use it to cover the company’s own debts, trading losses, or unrelated obligations.

That distinction became painfully important during the FTX bankruptcy.

If an exchange fails, customers want to know whether their bitcoin, ether, or other assets are still legally recognized as customer property or whether they become part of the company’s general pool of assets available to creditors.

The CLARITY framework attempts to address that problem through custody, segregation and bankruptcy provisions.

Coinbase has placed particular emphasis on these protections.

In an Aug. 12 policy explainer, the company said the legislation would establish baseline protections for federally regulated digital asset platforms, including segregation of customer assets, restrictions on conflicts of interest, public disclosures and stronger identity and anti-money-laundering controls.

Those are Coinbase’s characterization of the bill’s consumer-protection provisions, rather than a guarantee that the legislation will prevent every future exchange failure.

Would CLARITY really have stopped FTX?

That question requires some caution.

It is reasonable to argue that stronger segregation and disclosure requirements could have made the FTX situation harder to develop.

But it is too strong to say that the CLARITY Act would have definitively prevented FTX’s collapse.

FTX involved alleged fraud, misuse of customer funds, and misleading statements, according to U.S. authorities. Regulation cannot eliminate deliberate criminal behavior.

Even heavily regulated financial institutions can fail or suffer fraud.

The more realistic argument is that regulation can create earlier warning signals and impose consequences before a problem becomes catastrophic.

For example, mandatory records and reporting can give regulators more information. Customer-asset rules can limit how an exchange uses deposits. Conflict-of-interest requirements can restrict transactions between affiliated businesses. Capital and risk-management requirements can make it harder for a company to operate with inadequate financial resources.

Each measure addresses a different failure point.

The effectiveness of the system would ultimately depend on how regulators write the rules, how aggressively they enforce them, and whether exchanges comply.

Coinbase’s support has not always been unconditional

Armstrong’s current support for CLARITY also comes after a period in which Coinbase opposed an earlier version of the market-structure legislation.

In January, Armstrong said Coinbase had withdrawn its support for the version then under consideration, arguing that it was worse than the existing situation.

The disagreement centered in part on provisions involving stablecoin rewards and other issues affecting crypto businesses.

By April, Armstrong was publicly backing efforts to move the bill forward. In May, he described the legislation as being in a stronger and more bipartisan position following negotiations between the crypto and banking industries.

That history matters because the crypto industry is not speaking with one voice on every provision.

Coinbase itself has pushed back against language in earlier drafts that it believed could restrict certain stablecoin products.

The negotiations illustrate the central challenge facing lawmakers: writing rules strong enough to protect customers without creating requirements that established companies view as unnecessarily restrictive or that make it harder for new businesses to compete.

The Senate fight is not over

The CLARITY Act has made meaningful progress, but passage is not assured.

The Senate Banking Committee advanced its version in May by a 15-9 vote.

The updated Senate text released in July merged the work of the Banking and Agriculture committees and added provisions dealing with areas including digital commodities, law enforcement, investor protection and ethics.

The legislation is now headed for a procedural vote in September.

That does not mean the bill automatically becomes law. It would still need to clear the Senate, be reconciled with the House version and ultimately receive presidential approval.

Political disagreements have complicated the process, particularly over ethics provisions and President Donald Trump’s financial involvement in the crypto industry.

Trump has publicly urged Congress to pass the legislation, while critics have argued that the bill needs stronger restrictions on conflicts of interest involving political officials and their crypto businesses.

Those disputes could influence both the timing and final language of the legislation.

What CLARITY could mean for crypto users?

For an ordinary crypto user, the most important change would not necessarily be the classification of Bitcoin or another token.

It would be knowing what happens to their assets when they use a regulated intermediary.

Consider two exchanges offering the same Bitcoin trading service.

Under a weaker regulatory environment, customers may have limited visibility into how the platform holds assets, manages liquidity, or handles conflicts with affiliated companies.

Under a stronger framework, the exchange could face explicit requirements concerning custody, asset segregation, disclosures, recordkeeping, financial responsibility, and risk management.

That does not eliminate investment risk.

Bitcoin can still fall sharply. A token can lose most or all of its value. A decentralized protocol can be hacked. A customer can lose a private key.

But those are different risks from an exchange secretly using customer assets to support an affiliated trading operation.

CLARITY is primarily aimed at creating rules around the market structure and intermediaries that sit between users and digital assets.

The limits of regulation

There is also a risk that supporters overstate what federal legislation can accomplish.

A comprehensive regulatory framework could reduce certain forms of misconduct, but it cannot make crypto investments safe.

Regulators cannot guarantee the price of an asset, eliminate cyberattacks or prevent every fraudulent project from reaching investors.

There is also a question of regulatory burden.

New registration, reporting, custody and compliance requirements could increase costs for crypto businesses. Large exchanges may be better positioned to absorb those costs than smaller companies.

Critics have also raised concerns about whether some provisions could reduce competition, restrict decentralized finance or push innovative businesses outside the United States.

Consumer Reports, for example, argued in 2025 that the House version needed stronger consumer and investor safeguards, including protections against platform failures, conflicts of interest, and loss of funds.

That criticism highlights an important point: regulation can provide guardrails, but the quality of those guardrails matters.

A new phase for U.S. crypto regulation

The CLARITY debate reflects how dramatically the U.S. crypto conversation has changed since the FTX collapse.

In 2022, much of the industry’s focus was on rapid growth and mainstream adoption. FTX’s failure shifted attention toward custody, solvency, conflicts of interest, and whether customers could recover their assets when a platform failed.

Four years later, lawmakers are trying to turn those lessons into federal rules.

Armstrong’s argument is that clear regulation should not be viewed as a threat to crypto. Instead, he sees it as a way to make the market safer for ordinary users and more predictable for legitimate businesses.

That case will ultimately be tested by the details of the legislation and its enforcement.

If CLARITY becomes law with strong customer-asset protections, it could make an FTX-style misuse of customer funds more difficult. It would not guarantee that another crypto company could never fail.

The distinction is important.

For crypto users, the real test will not be whether Washington creates a new regulatory label for digital assets. It will be whether the rules provide meaningful protection when a platform gets into trouble.

FAQ

What is the CLARITY Act?

The CLARITY Act, formally the Digital Asset Market Clarity Act, is proposed U.S. legislation designed to establish a federal regulatory framework for digital assets and clarify the roles of the SEC and CFTC.

Why does Coinbase support the CLARITY Act?

Coinbase CEO Brian Armstrong says clearer federal rules would improve consumer protection, reduce regulatory uncertainty, and make it harder for bad actors to misuse customer assets. Coinbase has specifically highlighted asset segregation, conflict-of-interest restrictions and disclosure requirements.

How did FTX collapse?

FTX collapsed in 2022 after a liquidity crisis exposed serious problems involving its relationship with Alameda Research. U.S. prosecutors later said Sam Bankman-Fried misappropriated billions of dollars in customer funds.

Could the CLARITY Act prevent another FTX?

It could reduce some of the risks associated with an FTX-style failure, particularly through customer-asset segregation, custody requirements, disclosures and oversight. But no law can guarantee that an exchange will never fail or that fraud will never occur.

Is the CLARITY Act already law?

No. The legislation has advanced through Congress but has not been enacted. The Senate has scheduled a cloture vote for Sept. 15, 2026.

Which agencies would regulate crypto under CLARITY?

The bill would establish a framework involving both the Securities and Exchange Commission and the Commodity Futures Trading Commission, with jurisdiction depending on the type of digital asset and activity involved.

Does CLARITY make cryptocurrency safer?

It could make the market safer in some respects by imposing clearer rules on regulated intermediaries. It would not remove the investment risks associated with volatile cryptocurrencies, scams, hacks or self-custody.

What happens next for the CLARITY Act?

The Senate is expected to take up a procedural vote in September. If the bill advances, lawmakers would still need to resolve differences between the Senate and House versions before legislation could reach the president.

Conclusion

Brian Armstrong’s warning about another FTX-style collapse is ultimately an argument about trust.

Crypto users can accept market volatility. What caused the most serious damage in the FTX disaster was the possibility that customers did not know what was happening to assets they believed were being held for them.

The CLARITY Act attempts to address that weakness by bringing clearer federal rules to exchanges, brokers, dealers and other digital-asset businesses.

Whether it succeeds will depend on the final legislation and how regulators enforce it. But the core issue is unlikely to disappear: as more Americans use crypto through centralized platforms, customers will want to know that the assets they deposit are actually theirs — and that the rules will protect them if the company holding them fails.

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