In a surprising turn of events, Coinbase has withdrawn its support for the Senate crypto market structure bill just hours before a critical markup vote by the Senate Banking Committee. CEO Brian Armstrong expressed strong objections to the current draft, asserting it was “worse than the status quo.” His statement highlights a growing rift in the crypto industry as major players grapple over legislation that is viewed as crucial for the future of digital assets.
Armstrong made the announcement on social media, revealing that after careful review of the proposed legislation over the previous two days, Coinbase could not back the bill in its existing form. He specifically criticized several key issues, including a de facto ban on tokenized equities and prohibitions on decentralized finance (DeFi), which he argued would provide the government with unprecedented access to personal financial information.
Coinbase’s decision comes amid intense lobbying efforts against the backdrop of a contentious battle with the banking sector over provisions concerning stablecoin rewards. The GENIUS Act, which was signed into law by former President Donald Trump, previously allowed crypto companies to offer holders of stablecoins attractive yields on their deposits. However, the banking industry has since sought to limit these programs, fearing they could undermine traditional banking interests. The latest draft of the Senate bill bans yield offers on stablecoin holdings, representing a significant concession to bank lobbyists, while still enabling rewards derived from other activities such as transactions and loyalty programs.
Despite some initial optimism, a Coinbase representative had indicated earlier that the company could agree to the new stablecoin provisions as long as they did not become more restrictive. However, the forthcoming amendments set for discussion—many of which are bipartisan—aim to tighten these rules further, primarily benefiting banking interests.
Insiders close to the situation suggest that Coinbase’s withdrawal of support might serve as a strategic maneuver aimed at negotiating more favorable terms regarding stablecoin yield. However, others warn that this abrupt stance could jeopardize the bill’s chances of passing altogether. One policy expert described Coinbase’s actions as “farcically inept and entitled,” suggesting the firm might be overestimating its influence in the legislative process.
Coinbase has been heavily involved in political spending to sway regulatory outcomes, channeling substantial funds not only into U.S. elections but also into initiatives aligned with the previous administration. As part of its broader strategy, Armstrong mentioned that a Coinbase-affiliated political watchdog would actively monitor Senate votes during the markup, reflecting the company’s commitment to influencing key decisions in Washington.
With the upcoming midterm elections approaching and a super PAC associated with Coinbase having raised over $116 million for campaign efforts, the stakes are high for both the company and the broader crypto sector.
