TLDR
- Coinbase withdrew support for the Digital Asset Market Clarity Act, calling it “materially worse than the status quo”
- The Senate Banking Committee postponed its Thursday hearing after Coinbase’s announcement
- CEO Brian Armstrong cited issues including de facto ban on tokenized equities, DeFi restrictions, and stablecoin reward prohibitions
- Coinbase stock dropped 3.1% to $248.04 in early trading following the announcement
- Other crypto companies like Ripple and trade groups remain supportive of the bill despite Coinbase’s withdrawal
Coinbase stock took a hit Thursday morning after the crypto exchange made a surprising move. The company withdrew its support for pending crypto legislation just before a key Senate hearing.
Coinbase fell 3.1% to $248.04 in early trading. The stock was among the worst performers in the S&P 500 on Thursday.
CEO Brian Armstrong announced the decision on X Wednesday evening. He said the Digital Asset Market Clarity Act would be “materially worse than the status quo.”
The timing caught Washington off guard. The Senate Banking Committee had scheduled a hearing and vote on the bill for Thursday morning.
After Coinbase’s announcement, the committee postponed its meeting. Bitcoin and other cryptocurrencies dropped following the news.
Armstrong didn’t mince words about his concerns. “We’d rather have no bill than a bad bill,” he wrote.
The CEO listed several problems with the current draft. The legislation includes a de facto ban on tokenized equities.
It also contains restrictions on decentralized finance that Armstrong says give government unlimited access to financial records. The bill would kill rewards on stablecoins, a key revenue area for crypto exchanges.
Opposition Creates Divide in Crypto Industry
The move split the crypto community. Ripple CEO Brad Garlinghouse praised the bill on X, calling it “a massive step forward.”
The Digital Chamber, a major crypto lobbying group, said it remains engaged in the process. The group called the draft “a work in progress” and said it’s pushing for improvements.
Senate Banking Committee chair Tim Scott called the delay a “brief pause.” He said everyone remains at the table working in good faith.
Over 75 amendments have been proposed to the bill. Many will likely be withdrawn or defeated before final consideration.
The legislation aims to define how the SEC and CFTC oversee crypto markets. Lawmakers are still negotiating several contentious provisions.
Democrats have raised concerns about President Trump and his family profiting from crypto. They’ve said any bill needs to address this issue before advancing.
The banking industry also opposes parts of the bill. The American Bankers Association delivered a petition signed by more than 3,200 banks against stablecoin rewards.
Market Reaction and Next Steps
Despite the stock drop, the withdrawal might benefit Coinbase long-term. A flawed bill could create worse regulatory problems than current uncertainty.
Armstrong expressed optimism about reaching a better outcome. “I’m actually quite optimistic that we will get to the right outcome with continued effort,” he said.
Scott told CoinDesk that new language on stablecoin yields is circulating. He remains hopeful parties can agree on a final approach.
Coinbase has been heavily involved in Washington negotiations on crypto regulation. The company said from the start that protecting crypto rewards was a dealbreaker.
The bill addresses stablecoin company registration, SEC disclosure rules, and anti-money laundering regulations. How these provisions apply to decentralized finance remains under debate.
The Blockchain Association hasn’t decided its position on Coinbase’s withdrawal. The trade group said it’s discussing the situation.
Chairman Scott noted the intense negotiations of recent days. “People are very passionate about this issue,” he said, referring to “colorful language and strong opinions” in talks.
The committee has not announced a new date for the hearing and vote on the Digital Asset Market Clarity Act.
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