Key Takeaways
- •Coinbase has withdrawn support for the Digital Asset Market Clarity Act, citing significant risks to crypto innovation.
- •Brian Armstrong, CEO of Coinbase, has expressed concerns that the bill, as currently written, could negatively impact DeFi, stablecoins, tokenization, and consumer privacy.
- •Industry leaders are divided on the bill's potential, with some hoping for amendments 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Coinbase has withdrawn its support for the Digital Asset Market Clarity Act, warning that the latest Senate draft could harm the crypto industry rather than protect it.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 stated that the bill, in its current form, would leave the industry in a worse position than if no legislation were in place. In a post on X on Wednesday, Armstrong indicated that 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 highlighted several critical issues within the draft legislation. He pointed to what he described as an effective prohibition on tokenized equities and extensive restrictions on decentralized finance (DeFi) protocols.
Furthermore, he expressed concerns that the bill could grant government agencies broad access to users' financial data, posing significant privacy risks to consumers. According to Armstrong, the proposal would shift regulatory authority away from the Commodity Futures Trading Commission and consolidate more power within the US Securities and Exchange Commission.
This reallocation of power is a point of concern for many within the crypto sector, particularly given the SEC's historical approach of regulating the industry primarily through enforcement actions. Armstrong also cautioned that the bill might undermine stablecoin yields and create an uncompetitive environment for traditional banks.
Banking industry groups have previously argued that stablecoins offering yields around 5% could lead to substantial withdrawals of deposits from low-interest bank accounts.
Crypto Industry Split as Lawmakers Move Toward Markup
The reaction from across the crypto industry has been varied. ETF analyst James Seyffart described the development as disappointing, emphasizing the sector's urgent need for a clear market structure framework.
Coinbase's chief policy officer, Faryar Shirzad, echoed concerns regarding banking industry influence on the bill. In an interview with CNBC, Shirzad suggested that powerful banking lobbyists are pressuring lawmakers to protect existing financial incumbents. Shirzad stated that Coinbase's primary objective remains reducing friction around stablecoin adoption for the benefit of consumers.
Despite the criticisms, Armstrong conveyed optimism that lawmakers can revise the bill into a workable piece of legislation. Other industry leaders share this hopeful outlook. Ripple CEO Brad Garlinghouse believes that outstanding issues can be resolved during the markup process, viewing the legislation as a potential breakthrough for crypto regulation if implemented correctly.