Coinbase has backed away from supporting a major bill to structure the U.S. crypto market, leading to a sudden pause in Senate plans to advance the legislation. The decision came after a late review within the company raised concerns about consumer harm and weakened competition.
Although talks are expected to resume, the move has exposed deep divisions between the financial industry and lawmakers.
Late Draft Leads to Coinbase Opposition to Crypto Bill
Coinbase CEO Brian Armstrong explained that the company withdrew its support after discovering provisions in the bill that he said would favor banks at the expense of consumers and crypto companies.
Speaking in an interview with CNBCArmstrong said regulations should not be used as a tool for established financial institutions to foreclose competition.
According to Armstrong, Coinbase and other crypto companies remained involved in the negotiations until the final stages. That position changed when lawmakers released a draft of the bill late in the evening earlier this week.
After reviewing the hundreds of pages, Coinbase concluded that several sections could harm users. Furthermore, the broader market could be affected if the bill passes unchanged.
Armstrong noted that some provisions came as a surprise even to participants who had been closely involved in the conversations. Given the size of the bill and its potential effects, he argued that moving forward without revisions would have been irresponsible. Coinbase subsequently chose to publicly oppose the legislation in its current form.
Market structure bill threatens to be delayed amid opposition from the industry
Shortly after Coinbase’s announcement, the Senate Banking Committee canceled a plan drafting of the bill. Chairman Tim Scott confirmed the postponement late Wednesday and indicated that no new date has been set. The negotiations were already fragile and Coinbase’s withdrawal put pressure on the already divisive process.
Armstrong warned that passing the bill as drafted could have serious consequences for ordinary users. He described the potential outcome as “catastrophic” for American consumers, prompting the company and others in the industry to take a public stance.
Coinbase’s concerns focused on several key areas:
- Rules that could restrict crypto companies while giving banks a regulatory advantage.
- Provisions that may limit consumer choice in financial products.
- Language that could block competition instead of encouraging it.
- Sections that risk removing multiple crypto services from the market.
- A lack of clarity on how innovation would be handled under federal supervision.
Despite the setback, Armstrong emphasized that the intention was not to hold back progress in crypto regulation. Instead, he interpreted the move as an attempt to take action legislators back to the table and open the space for changes.
He expects a revised draft to be released and thinks an increase could still happen within a few weeks. Armstrong emphasized that crypto legislation remains a top priority for the industry. The CEO portrayed the delay as part of a normal negotiation process and not a collapse in talks.
Crypto Companies Oppose Stablecoin Limits Related to Banking Interests
A major point of disagreement concerns the role of banks and stablecoins. Armstrong argued that banks should not use regulations to suppress crypto companies. He argued that consumers deserve a better return on their money, noting that stablecoins already offer higher returns than traditional savings accounts.
He also described stable coins as an opportunity for the banks rather than as a threat. While banks typically pay low interest rates on deposits, stablecoins can offer returns closer to 3.8%. According to him, competition should determine which products are successful, and not the regulatory burden from established players.
Armstrong expressed concerns about the shift of funds from banks to stablecoins, stating that crypto companies do not operate like traditional banks. Stablecoins, he explained, are fully backed and not part of fractional reserve systems.
Key points Armstrong made about stablecoins and banking include:
- Stablecoins are backed on a one-to-one basis with reserves.
- The proposed rules would maintain reserves in short-term U.S. Treasury bonds.
- Consumer funds remain fully accounted for at all times.
- Crypto companies do not create money by lending deposits.
- Crypto companies must be allowed to offer loans under clear rules.
Armstrong stated that Coinbase would rather see no bill passed than pass a bill that harms users. He pointed out that the design examined could have eliminated several Coinbase products currently available. He characterized the breakdown of the talks as necessary to force lawmakers to reconsider key issues.
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