Coinbase Draws a Line in the Sand on Market Structure Bill

 

Coinbase is stepping back from Washington’s biggest crypto push yet.

Just days before a crucial vote in the Senate Banking Committee, the largest US crypto exchange says it will not support the Senate’s sweeping crypto market structure bill in its current form. The message from Coinbase CEO, Brian Armstrong, is blunt. Regulatory clarity matters, but not at any cost.

The move highlights a growing divide between lawmakers eager to lock in federal rules and an industry increasingly wary of legislation that could reshape its business in unintended ways.

 

A Bill Meant to End the Gray Area

The Senate bill, months in the making, is designed to finally spell out how digital assets are regulated in the United States. At its core, the proposal tries to answer long-standing questions about which crypto assets fall under securities law, which should be treated as commodities, and how oversight should be split between regulators.

For years, crypto companies have complained that the lack of clear rules has pushed innovation offshore and left firms vulnerable to enforcement actions after the fact. On paper, this bill is supposed to fix that.

But as the text has taken shape, it has also picked up provisions that some in the industry see as deal-breakers.

 

Stablecoin Rewards Become the Flashpoint

For Coinbase, the biggest problem sits with stablecoins.

The draft legislation includes language that could sharply limit or effectively eliminate rewards paid to users who hold stablecoins on platforms like Coinbase. These rewards are not technically interest paid by issuers, but incentives offered by exchanges and intermediaries. Still, critics argue they look and feel a lot like bank deposits, without bank-style regulation.

Traditional banking groups have pushed hard for tighter rules here. Their concern is straightforward. If consumers can earn yield on dollar-pegged crypto tokens outside the banking system, deposits could drain from insured banks, particularly smaller ones.

Coinbase sees it differently. Stablecoin rewards have become a meaningful part of how crypto platforms compete and how users engage with dollar-based crypto products. Cutting them off, the company argues, would harm consumers and hand an advantage back to traditional finance.

In private and public conversations, Coinbase executives have made it clear that they are unwilling to back a bill that undercuts what they view as a legitimate and already regulated product.

"After reviewing the Senate Banking draft text over the last 48 hours, Coinbase unfortunately can’t support the bill as written,” Armstrong said. "This version would be materially worse than the current status quo, we'd rather have no bill than a bad bill."

 

Why This Matters Beyond Coinbase

Coinbase’s stance carries weight. It is one of the most politically active crypto companies in Washington and often serves as a bellwether for broader industry sentiment.

If Coinbase is out, others may quietly follow.

That raises the risk that lawmakers end up with a bill that lacks meaningful industry buy-in, or worse, one that passes but leaves key players unhappy enough to challenge or work around it.

Some firms are already exploring alternatives, including banking charters or trust licenses, as a hedge against restrictive federal rules. Others may simply slow US expansion and look overseas.

 

A Narrow Path Forward in the Senate

The timing is not ideal.

The Senate Banking Committee is expected to vote on the bill imminently, but support remains fragile. Lawmakers are divided not just on stablecoins, but also on how to handle decentralized finance, custody rules, and even ethics provisions tied to political exposure to crypto.

Add in election-year politics, and the window for compromise looks tight.

If the bill stalls or fails in committee, there is a real chance it gets pushed into the next Congress. That would mean at least another year, and likely more, of regulatory uncertainty.

 

No Law vs a Bad Law

Behind the scenes, a familiar argument is playing out.

Some in Washington believe that imperfect legislation is better than none at all. The industry, scarred by years of enforcement-first regulation, is no longer convinced.

Coinbase’s decision reflects a growing view among crypto companies that a flawed law could do more long-term damage than continued ambiguity. Once rules are written into statute, they are far harder to undo.

For now, the standoff continues.

 

Whether lawmakers soften the bill to keep major players on board or push ahead regardless may determine not just the fate of this legislation, but the shape of US crypto regulation for years to come.

 

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