Last year around this time, crypto enthusiasts were celebrating the prospect of Donald Trump's return to the White House. A year later, reality has tempered that optimism.
Stablecoin Bill Hits Snag in Senate
A highly anticipated stablecoin bill encountered a significant delay in the Senate on Wednesday, causing considerable concern for digital-asset firms. The crypto industry, which had invested heavily in the belief that a Trump presidency would be highly beneficial, now appears to be reacting with disappointment, akin to a child denied a second helping of dessert. Coinbase Global and other digital-asset companies were quick to express their dissatisfaction after the Senate Banking Committee postponed discussions on the bill, a move that followed Coinbase's withdrawal of support.
The primary point of contention revolved around restrictions on offering yield or "rewards" on customers' stablecoin holdings. These very stablecoins were reportedly instrumental in fueling the crypto sector's political engagement and were even suggested to have bolstered Trump's election prospects. However, they are now generating significant anxiety within the industry.
The market reacted swiftly to the news. Coinbase's shares experienced a decline of 6.4% by the end of trading on Thursday, and Circle's shares also dropped by nearly 10%.
The proposed legislation could potentially ban stablecoin yield entirely, although some reward programs might still be permitted. Crypto executives are reportedly scrutinizing the legal text with intense focus. According to Bloomberg, Nana Murugesan, a former Coinbase executive, remarked that the legislation is not straightforward.
Historically, stablecoins have attracted users by offering yield, thereby discouraging them from converting their holdings back into fiat currency. This strategy positions stablecoins as a more attractive alternative to traditional savings accounts. However, banking institutions have voiced concerns, warning that yield-bearing stablecoins could divert deposits away from them.
Coinbase CEO Brian Armstrong, a known supporter of Trump, announced on X that the company was withdrawing its support due to "too many issues."
Industry Unprepared for Regulation
Senator Cynthia Lummis expressed her views on the situation, tweeting that the crypto industry's reaction "proves they just are not ready." This statement serves as a reminder that even with political backing, market forces and legislative bodies operate independently.