Coinbase Opposes the Crypto Market Structure Bill! CEO Highlights 4 Major Flaws: Eroding Privacy, Stifling Innovation

Coinbase announces withdrawal of support for the current crypto market structure bill in the U.S. Senate Banking Committee. It points out four major issues with the crypto bill draft, including privacy violations and restrictions on innovation. As a result, lawmakers reveal that the Senate review process may be delayed.

Coinbase does not support the crypto market structure bill. Why?

U.S.-listed cryptocurrency exchange Coinbase publicly announced early this morning Taiwan time that it cannot support the current crypto market structure bill in the Senate Banking Committee.

Coinbase CEO Brian Armstrong straightforwardly stated that, although he appreciates the efforts of the lawmakers, if the current draft passes, the situation of the U.S. crypto market will become worse than it is now.

Armstrong highlighted four key issues with the crypto market structure bill:

1. Infringement on Privacy: The bill includes a ban on decentralized finance (DeFi), with provisions that could grant the government unlimited access to users’ financial records, severely infringing on user privacy rights.
2. Restrictions on Tokenization: The draft effectively bans the development of tokenized stocks.
3. Weakening CFTC Authority: The bill language diminishes the authority of the Commodity Futures Trading Commission (CFTC), subordinating it to the Securities and Exchange Commission (SEC), which could cause regulatory chaos and stifle innovation.
4. Stablecoin Yield Restrictions: Amendments in the draft would kill the yield incentive mechanisms for stablecoins.

Therefore, Armstrong emphasizes that it’s better not to pass a bad bill than to pass one. As a result, Coinbase’s stock fell 2.17% in after-hours trading.

Image source: Google Finance Coinbase stock fell 2% in after-hours trading

Coinbase withdraws support, crypto industry voices support

As a leading player in the U.S. crypto industry, Coinbase’s public opposition to the crypto market structure bill will significantly impact the bill’s progress.

Jaret Seiberg, a financial policy analyst at TD Cowen, said that losing Coinbase’s support would seriously undermine the credibility of the bill and hinder its passage in this Congress.

Renowned venture capitalist Tim Draper also publicly supported Armstrong, believing that the current Senate compromise version shows excessive interference by the banking sector, and if forced through, it’s better not to have this bill at all.

Image source: X Well-known venture capitalist Tim Draper publicly supports Coinbase’s opposition to the crypto market structure bill

If the bill is legislated in its current form, U.S.-based crypto platforms will face even harsher competitive disadvantages. Especially with restrictions on stablecoin yields, which could lead users to move overseas, further weakening the U.S.’s global competitiveness in digital assets.

Related reports:
U.S. crypto legislation to be reviewed! Red lines drawn for stablecoin yields, SEC: Implement crypto regulations by 2026

Ryan Rasmussen, head of research at Bitwise, also pointed out that the current draft is unfriendly to tokenization, stablecoins, and developers. The industry generally believes that progress should be paused to avoid sacrificing long-term development due to hasty legislation.

Two individuals involved in negotiations told CoinDesk that, whether Coinbase supports or opposes the bill, Congress does not have enough votes to push it forward. Even if voting follows party lines—all Republicans in favor, all Democrats against—due to concerns from members of both parties, it seems unlikely to pass.

Related reports:
U.S. crypto regulation crosses the line! Lawmakers: GENIUS and CLARITY bills threaten self-custody principles

Crypto Market Structure Bill Hearing May Be Delayed

U.S. Senator Cynthia Lummis told Bloomberg that, due to Coinbase’s withdrawal of support, the Senate Banking Committee’s bill review hearing scheduled for today is very likely to be postponed. She also recently proposed the Blockchain Regulatory Certainty Act, aiming to establish legal boundaries for DeFi developers first.

Losing support from key industry representatives will force Committee Chair Tim Scott to reconsider the bill’s content to avoid pushing it through without consensus.

Additionally, the Senate Agriculture Committee has also adjusted its schedule. The hearing originally scheduled for the same day has been confirmed to be postponed, with a new bill text expected to be announced on January 21, and the review delayed until January 27.

These signs indicate that the U.S. Congress is facing pressure to reorganize the legislative process on crypto market structure, and lawmakers need more time to resolve contentious issues such as privacy rights, regulatory authority division, and stablecoin regulation.