Quick Breakdown
- Coinbase has withdrawn support for the Digital Asset Market Clarity Act, citing major risks to crypto innovation
- Brian Armstrong warns the bill could harm DeFi, stablecoins, tokenization and consumer privacy
- Industry leaders are divided, with some still hopeful that changes can be made during the markup process
Coinbase has withdrawn its support for the Digital Asset Market Clarity Act, warning that the latest Senate draft could harm the crypto industry rather than protect it.
Coinbase CEO Brian Armstrong said the bill, as currently written, would leave the industry worse off than having no legislation at all. In a post on X on Wednesday, Armstrong said the exchange could no longer support the proposal after reviewing the Senate Banking Committee’s draft text.
Coinbase flags risks to DeFi, tokenization and privacy
Armstrong outlined several red flags in the draft legislation, including what he described as an effective ban on tokenized equities and broad restrictions on decentralized finance protocols.
He also warned that the bill could give government agencies sweeping access to users’ financial data, raising serious privacy concerns for consumers. According to Armstrong, the proposal shifts regulatory power away from the Commodity Futures Trading Commission and concentrates more authority in the US Securities and Exchange Commission.
That shift is troubling for many in the crypto sector, given the SEC’s history of regulating the industry primarily through enforcement actions. Armstrong further cautioned that the bill could undermine stablecoin rewards and protect traditional banks from competition.
Banking industry groups have argued that stablecoins offering yields of around 5% could prompt a large-scale withdrawal of deposits from low-interest bank accounts.
Crypto industry split as lawmakers move toward markup
Reaction across the crypto industry has been mixed. ETF analyst James Seyffart said the development was disappointing, stressing that the sector urgently needs a clear market structure framework.
Coinbase chief policy officer Faryar Shirzad echoed concerns about banking influence on the bill, telling CNBC that powerful banking lobbyists are pushing lawmakers to defend existing financial incumbents. Shirzad said Coinbase’s priority remains reducing friction around stablecoin adoption to benefit consumers.
Despite the criticism, Armstrong said he remains hopeful lawmakers can revise the bill into something workable. Other industry leaders share that optimism. Ripple CEO Brad Garlinghouse said he believes outstanding issues can be resolved during the markup process, calling the legislation a potential breakthrough for crypto regulation if done correctly.
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