Major US crypto exchange Coinbase has announced its withdrawal of support for the Digital Asset Market Clarity Act. CEO Brian Armstrong expressed concerns that the current version of the bill could cause significant harm to the cryptocurrency industry, stating it would be "materially worse than the current status quo."
In an X post on Wednesday, Armstrong articulated, "We’d rather have no bill than a bad bill. Hopefully we can all get to a better draft." He further elaborated that after reviewing the Senate Banking draft text over the preceding 48 hours, Coinbase "unfortunately can’t support the bill as written."
Key Concerns Raised by Coinbase CEO
Brian Armstrong highlighted several critical concerns within the draft bill. He described a provision that could lead to a "defacto ban" on tokenized equities and pointed to sweeping restrictions proposed for decentralized finance (DeFi). Armstrong argued that these measures would grant the government "unlimited access" to financial records, thereby posing serious privacy risks for consumers.
Furthermore, Armstrong contended that the draft bill would diminish the authority of the Commodity Futures Trading Commission (CFTC) and hinder innovation. He expressed apprehension that it would significantly increase the power of the US Securities and Exchange Commission (SEC). This shift in authority is a major concern for the crypto industry, particularly given the SEC's perceived "regulation by enforcement" approach under the current administration.
Armstrong also voiced a widely held industry fear that the current draft could negatively impact "rewards" offered on stablecoins. He suggested that the bill might be designed to protect traditional banks from competition.
Concerns about stablecoins have been echoed by banking lobbyists, who have warned that offering users yields around 5% risk-free on stablecoins could lead to a significant "deposit flight," potentially draining billions from low-interest bank accounts.
Industry Participants Express Divided Opinions
ETF analyst James Seyffart commented on Armstrong's post, stating that this development is "not what we wanna see/hear with regard to CLARITY." He emphasized the industry's need for a comprehensive market structure bill.
Despite these concerns, Armstrong remains hopeful that lawmakers will ultimately achieve the "right outcome." This sentiment is shared by other executives within the cryptocurrency sector.
Ripple CEO Brad Garlinghouse expressed his continued optimism, stating that he believes "issues can be resolved through the mark-up process." He described the bill as a "massive step forward in providing workable frameworks for crypto, while continuing to protect consumers." Garlinghouse added, "This bill’s success is crypto’s success."
The Senate Committee on Agriculture, Nutrition and Forestry has scheduled a markup hearing for January 27. This hearing follows the legislative text's release on January 21.
Earlier in the week, SEC chair Paul Atkins indicated that he is "bullish" on the prospects of the bill being signed into law by the President this year.