Coinbase Pulls Support, Delaying U.S. Crypto Market Structure Bill

Late draft changes pushed Coinbase to oppose the crypto bill, exposing bank influence and stalling Senate progress.

Coinbase has stepped back from supporting a major U.S. crypto market structure bill, triggering a sudden pause in Senate plans to advance the legislation. The decision came after a late review raised concerns inside the company about consumer harm and weakened competition. 

Even though talks are expected to resume, the move exposed deep divisions between the financial sector and lawmakers.

Late Draft Triggers Coinbase Opposition to Crypto Bill

Coinbase CEO Brian Armstrong explained that the company withdrew its support after discovering provisions in the draft bill that he believes would favor banks at the expense of consumers and crypto companies. 

Speaking in an interview with CNBC, Armstrong said regulation should not be used as a tool for established financial institutions to shut out competition.

According to Armstrong, Coinbase and other crypto firms stayed engaged in negotiations until the final stages. That position changed when lawmakers released a late-night draft of the bill earlier this week. 

After reviewing the hundreds of pages, Coinbase concluded that several sections could damage users. Additionally, the broader market could be affected if the bill moved forward without changes.

Armstrong noted that some provisions came as a surprise even to participants who had been closely involved in talks. Given the scale of the bill and its potential effects, he argued that moving ahead without revisions would have been irresponsible. Coinbase then chose to publicly oppose the legislation in its current form.

Market Structure Bill Faces Delay Amid Industry Opposition

Shortly after Coinbase’s announcement, the Senate Banking Committee canceled a planned markup of the bill. Chairman Tim Scott confirmed the delay late Wednesday and indicated that no new date has been set. Negotiations had already been fragile, and Coinbase’s withdrawal added pressure to an already divided process. 

Armstrong warned that passing the bill as drafted could have had severe consequences for everyday users. He described the potential outcome as “catastrophic” for American consumers, which led the company and others in the industry to take a public stand.

Concerns raised by Coinbase focused on several key areas:

• Rules that could limit crypto firms while giving banks a regulatory advantage.
• Provisions that may reduce 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 around how innovation would be treated under federal oversight.

Despite the setback, Armstrong stressed that the goal was not to stop progress on crypto regulation. Instead, he framed the move as an effort to bring lawmakers back to the table and reopen space for changes. 

He expects a revised draft to appear and believes a markup 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 rather than a collapse in talks.

Crypto Firms Resist Stablecoin Limits Tied to Bank Interests

A major point of disagreement involves the role of banks and stablecoins. Armstrong argued that banks should not be allowed to use regulation to suppress crypto companies. He maintained that consumers deserve better returns on their money, noting that stablecoins already offer higher yields than traditional savings accounts.

He also described stablecoins as an opportunity for banks rather than a threat. While banks typically pay low interest on deposits, stablecoins can offer returns closer to 3.8%. In his view, competition should determine which products succeed, not regulatory pressure from established players.

Armstrong addressed concerns about funds moving from banks into stablecoins, stating that crypto firms do not operate like traditional banks. Stablecoins, he explained, are fully backed and not part of fractional reserve systems.

Key points Armstrong raised on stablecoins and banking include:

• Stablecoins are backed one-to-one with reserves.
• Proposed rules would hold reserves in short-term U.S. Treasurys.
• Consumer funds remain fully accounted for at all times.
• Crypto firms do not create money through lending deposits.
• Crypto companies should be allowed to offer loans under clear rules.

Armstrong stated that Coinbase would rather see no bill passed than accept one that harms users. He pointed out that the draft under review could have eliminated several Coinbase products currently available. He characterized the breakdown in talks as necessary to force lawmakers to reconsider core issues.